traditional monetary policy measures. although the conditions are always the same for all participants, the precise impact may differ for individual banks or market participants and depends on their balance sheet situation. the full effect of negative interest is felt on the money and capital markets even in the case of high exemption thresholds. at present, at approximately chf 170 billion, some 40 % of snb sight deposits are subject to negative interest. nevertheless, transmission of the negative interest rate is working well, with interest rates on this market aligning themselves directly with the negative interest rate of – 0. 75 %. this is because interest rate determination is based on the marginal interest rate, in other words the rate for holding one additional unit of sight deposits. movements in snb sight deposits chart 2 shows sight deposits of domestic banks ( dark blue area ) which, together with other sight deposits ( light blue area ), comprise total sight deposits at the snb. cumulative exemption thresholds come to some chf 300 billion. when negative interest came into effect in january, thresholds were 88 % exhausted. since then, this percentage has steadily increased and is now just over 98 %. there are two principle reasons for this. first, a redistribution of sight deposits between banks has taken place. institutions whose sight deposits exceeded the exemption threshold have transferred money from their snb accounts to banks which had not exhausted their threshold and were prepared to accept these funds at somewhat less negative interest than – 0. 75 %. this redistribution of sight deposits can be observed, for instance, on the swiss franc repo market. chart 3 shows how, on that market, turnover was considerably higher than that recorded for the whole of 2014. most of the turnover was accounted for by transactions with very short terms. this is likely to include many transactions aimed at exhausting remaining thresholds. the second reason for the higher exhaustion of the exemption thresholds is that banks ’ sight deposits at the snb have increased overall. since negative interest came into effect in january, sight deposits have risen from approximately chf 440 billion to some chf 470 billion at present. the interest burden increases overall when the snb feeds more liquidity into the system, in particular in the event of further foreign exchange market interventions. this, in its turn, makes it even less attractive to hold swiss francs. now that almost all exemption thresholds are exhausted, every newly - created swiss franc is subject to negative interest. bis central bankers ’ speeches changes in the management of foreign exchange

requirements for abs transactions. and in that respect, i am not thinking of endowing this field of business with any unjustified privileges. i am and remain firmly convinced that, in order to create a system of proper incentives for banks ’ internal business and risk assessment strategies, the capital requirements imposed on banks must be aligned strictly to the risk entailed in the business operations involved. as the cost of capital for abs - related risks has been raised simplistically without much differentiation in basel since 2010, it is now time for another look at this field of business. but what can the ecb still do for the revitalisation of the abs market? we have already relaxed the requirements for abss that are eligible for use as collateral in our refinancing operations. we have lowered the minimum standard of creditworthiness for certain types of abs, added further classes of abs to our range of eligible collateral and reduced the valuation haircuts for abss. the market for abss could also be revitalised if the ecb were to directly purchase securities that are backed by corporate loans. i have an open mind regarding the assumption of the liquidity risk involved in such a measure. depending on how these operations are designed, however, the ecb could take on not only the liquidity risk inherent to such paper, but also the credit risk. in this regard, i have my doubts. if there is public interest in market intervention, for example in order to specifically encourage lending to small and medium - sized enterprises, the national governments of member states should not be left out of the equation or, expressed more precisely, they should not be relieved of their responsibility. for instance, government guarantee programmes implemented via state development banks for the more risky abs tranches could be a decisive contribution to success. micro - and macro - prudential instruments to preserve financial stability i have now referred often enough to the benefits, but also the medium and long - term risks, of conventional and unconventional measures. prolonged phases of low interest rate policies and a generous supply of liquidity to banks simply do have a material influence on asset prices and the supply of credit to an economy. they may therefore also endanger financial stability, in particular if : 1. they lead to declining risk aversion and the formation of financial market bubbles ; 2. the tendency to over - indebtedness increases ; 3. structural problems and productivity losses are not sufficiently tackled ; 4. the scope for monetary policy action