of recessions on banks become evident. in the baseline scenario, the profitability of domestically focused banks is likely to come under further pressure. first, the anticipated deterioration in credit quality is expected to lead to increased value adjustments and write - downs on loans to swiss companies. second, the interest margin is expected to narrow further due to the persistent low interest rate environment. while domestically focused banks should remain profitable in aggregate, against this background, some of them are expected to incur losses. uncertainty about the future course of the coronavirus pandemic remains high. in this context, the increased vulnerability of the domestic mortgage and residential real estate markets presents an additional risk factor for the banks. should the impact of the pandemic on household and corporate income be much greater than currently assumed, it could trigger a price correction in the real estate market. equally, such declines in income could lead to a materialisation of the historically high affordability risks. both of these developments would negatively affect the quality of the banks ’ mortgage portfolios. given these challenges, the available capital buffers of the domestically focused banks are a crucial element for their lending capacity and loss - absorbing capacity. the snb ’ s scenario analysis indicates that, in aggregate, domestically focused banks would also be in a position to absorb the losses incurred under significantly more adverse conditions than assumed in the baseline scenario. use of cash this brings me to the last section of my speech in which i will talk about the impact the coronavirus pandemic is having on the use of cash. there are currently two main developments. for one, banknote circulation in switzerland rose sharply during the first wave of the pandemic in spring. this increase was mainly driven by the demand for large denomination banknotes and indicates an increased desire to hold reserves in the form of cash. second, available data on card payments and cash withdrawals from atms suggest that for payment purposes, cashless methods are currently being used more than prior to the pandemic, while cash is being used less. following the easing of containment measures, the amounts paid with cards have risen above their pre - crisis level. by contrast, the volume of cash withdrawn at atms continues to be slightly below its pre - crisis level. how much of a long - term impact these developments will have on the use of cash remains to be seen. the survey on payment methods, which the snb carried out this autumn for the second time since 2017, will provide us with more information on

. the snb ’ s foreign exchange reserves, however, do not represent profit. they are an asset item on our balance sheet and are offset by the increased money supply as a liability item. if we were to make an unrequited transfer of our foreign currency to a sovereign wealth fund, our equity would reduce or even become negative. the sovereign wealth fund or the confederation would therefore have to buy the foreign currency from us. but where the money would come from for this is not clear. in principle, the confederation could borrow from the capital markets, though this is unlikely to be feasible due to the debt brake. or, we could grant the confederation a loan, but this would be equivalent to state financing via the central bank ’ s printing press, which is prohibited under the national bank act. bis central bankers ’ speeches a further problem would arise if, in the future, a reduction in the money supply were to become necessary for monetary policy reasons. the money supply was originally expanded to satisfy the increased demand for francs. however, it is possible that demand may also fall again. if there were to be a sharp decline in demand, the snb would have to reduce the money supply again in order to keep monetary policy conditions stable. the simplest way would be to buy back swiss francs, namely by selling foreign exchange reserves. but if the foreign exchange had already been transferred to a sovereign wealth fund, this would no longer be possible. another hope expressed in connection with the creation of a sovereign wealth fund is better management of foreign exchange reserves. however, the snb already manages its foreign exchange in a professional manner and is considered to be a leading central bank in asset management. we have also invested in a broad range of assets for a number of years now. our portfolio is diversified over different currencies and asset classes, and we invest heavily in foreign shares and corporate bonds. equity exposure is 20 %, which is high for a central bank. on a long - term average, higher profits are only possible by taking higher risks. this would also apply to a sovereign wealth fund. however, higher risks also mean that profit fluctuations would be greater than before. of course, a sovereign wealth fund could hedge against certain risks. exchange rate risk represents the biggest risk for foreign currency investments. but it is precisely this risk that a sovereign wealth fund should not be allowed to hedge, as it would conflict with monetary policy. this is because hedging would result in upward pressure on the swiss fran