increase the resilience of banks. consequently, a comprehensive revision of the liquidity regulations for big banks is currently underway. nonetheless, better capital and liquidity requirements do not rule out the possibility that banks will again face existential difficulties in the future. the snb therefore considers all of the efforts that are going into facilitating orderly wind - downs of large international institutions in future to be just as important. the lack of any clearly defined and internationally coordinated wind - down procedure contributes to a de facto obligation on the part of the state to provide assistance to these institutions. any rescue of a large financial institution brings more than just high costs. the “ too big to fail ” issue also has a tendency to harbour incentives for banks to enter into excessive risks. in switzerland, the “ too big to fail ” question is particularly relevant and, in many respects, unique, given the importance of the big banks for the country ’ s banking sector and its economy. a clearly defined and internationally coordinated wind - down procedure would help to ease this problem. the interplay between national jurisdictions is, however, extremely complex, and finding a solution for a predefined and internationally coordinated procedure of this kind is correspondingly challenging and time - consuming. the snb therefore believes that careful consideration must also be given to alternative approaches. these include rules governing the organisational structure of large financial institutions. the aim of such rules would be, in a crisis situation, to split off those units of a bank that are important for the functioning of the economy and wind down the rest. this does not mean, however, that this type of approach would question the universal bank model as such. the snb is aware that rules governing the organisational structure of large financial institutions are not easy to draw up. legal and operational aspects would therefore need to be analysed with the requisite care and any regulations drawn up in close collaboration with the banks affected. we are convinced that everything needs to be done to implement one of these approaches for facilitating the wind - down of large financial institutions. if significant progress is not achieved within a reasonable time frame, measures that address the size of the banks should also be examined. one way in which the size of a bank can be influenced is through capital regulations. capital requirements that are dependent upon size reduce a bank ’ s incentive to inflate its balance sheet without restraint. measures with a direct impact on the size of banks are also conceivable. a size restriction would of course be

and asset class. the basic principles of foreign exchange reserve management are very clear ; let me just quickly run through them. first principle : primacy of monetary policy over foreign exchange reserve management. concretely, changes in foreign exchange reserves result from monetary policy decisions. the level of these reserves is a variable upon which reserve management policy has no influence. once this framework has been established, the management of foreign exchange reserves takes place independently from monetary policy. however, the snb does need to make sure that its investments do not give rise to any conflict of interest with the objectives of monetary policy, or indeed of the snb as regards financial stability. so, for example, we do not invest in swiss financials, so as to avoid a conflict between the management of foreign exchange reserves and the snb ’ s mandate to contribute to financial stability in switzerland. as a general rule, the snb does not invest in swiss corporate equities. second principle : the criteria governing the management of foreign exchange reserves are primarily the security of investments and their liquidity. return is also a factor. secure and liquid assets are key, because the snb must always be able to implement its monetary policy, and hence must have rapid access to its foreign exchange reserves, should the need arise. the need for secure assets means that a large proportion of our investments are in government bonds ; the need for liquidity means that we invest in the world ’ s most liquid assets and currencies. finally, the third principle is this : the snb takes care to ensure that its investments do not disrupt the markets. we are aware that the huge amounts we have under management could impact significantly on market prices. to prevent this kind of problem, we control the volumes we place on the markets, so as to avoid having any perceptible market impact. thus, with such a large volume to invest, there is a fairly long period of transition before the desired allocation is achieved. we are sometimes obliged to hold liquidity on our accounts at other central banks for a while, until it can be invested in line with our investment strategy. a number of players are involved in implementing the investment strategy. i am not planning to go into too much detail about the investment process today. briefly, the governing board decides on the main investment principles, as well as the strategy. the asset management unit then implements this strategy, monitored by the risk management unit. risk management is also tasked with reporting regularly to the governing board and the