the risk of sharp appreciations. as a result of the introduction of euro notes and coins, the euro will increasingly be used as a means of payment in the tourism sector and the hotel and restaurant industry as well as in foreign trade, to some degree simply as a substitute for the d - mark. apart from very few viable exceptions, however, employment and loan contracts will continue to be concluded in swiss currency, and the large majority of domestic payments, too, will be effected in swiss francs in future. the euro will thus not emerge as a parallel currency in switzerland. the purview of swiss monetary policy will remain unaffected by the arrival of the euro. by retaining the swiss franc, we are able to pursue an independent monetary policy that is oriented to the needs of the swiss economy, and to keep interest rates at a low level. in this respect, the exchange rate is a key element for producing our inflation forecast and, therefore, for determining our policy. inflation forecast december 2001 with libor at 1. 75 % annual average inflation in % 1. 0 0. 9 1. 3 1. 5

philipp hildebrand : financial stability – objectives and challenges for central banking speech by mr philipp hildebrand, vice - chairman of the governing board of the swiss national bank, at the bank of france, fondation banque de france, centre for economic policy research ( cepr ), paris, 30 november 2007. * * * i am honored and very pleased to be able to participate in this distinguished conference hosted by the banque de france and cepr. allow me to thank governor noyer and his colleagues for their hospitality. my objectives today are to discuss why central banks are interested in financial stability and address some of the challenges that central banks face during the ongoing market turbulence. unfortunately, the market turbulence is not behind us. it is therefore difficult to draw conclusive lessons. as a result, much of what i have to say is tentative by nature. naturally, i would be pleased if some of my remarks ultimately spark some interest for future research amongst the many academics here. financial stability is not a new topic for central banks. in many ways, central banks were created to strengthen the stability of the financial system. lender of last resort facilities and banking supervision essentially constitute a tandem response to the fact that banks – which are by design leveraged institutions – have periodically proven to be prone to crises. such crises can lead to sharp contraction of credit and thus cause or augment costly economic downturns. monetary policy and financial stability are therefore deeply and historically linked. nonetheless, it is evident that most central banks devote far greater resources to financial stability related issues than they did twenty years ago. one indicator of this heightened interest in financial stability is the number of financial stability reports that are now routinely published. currently, more than 40 central banks publish a financial stability report on a regular basis. interestingly, most central banks have intensified their work on financial stability issues during a period in which the global financial system can be said to have been robust. during the past few years, the overall conditions in the global financial system have been described by many observers as " as good as it gets ". the financial system was apparently very resilient and able to absorb a series of significant shocks. meanwhile, recent research suggests that in the past two decades systemic risk in banking has increased in both the us and the euro area. 1 indeed, systemic risk seems to have re - emerged quite suddenly when, after august 9, many of the world ’ s money markets dried up and a wide range of risk indicators