thomas jordan : price and financial stability - a demanding year for the swiss national bank speech by mr thomas jordan, chairman of the governing board of the swiss national bank, at the 115th ordinary general meeting of shareholders of the swiss national bank, berne, 28 april 2023. * * * madam president of the bank council dear shareholders dear guests it is a pleasure for me to welcome you to our general meeting today. i see many familiar faces, but also a large number of new shareholders. a warm welcome to you all. i am delighted that so many of you have responded to our invitation. we are living in extremely turbulent times. our last general meeting was marked by russia's invasion of ukraine, and the general meetings in the previous two years by the coronavirus pandemic. this year we have witnessed a shock to the swiss financial sector, namely the crisis at credit suisse and the takeover of the bank by ubs. today, i would like to give you some more detailed information about the role of the swiss national bank in managing this latest crisis. i will also set out how we have been combating inflation with our monetary policy since the last general meeting. let me start with the second topic. tighter monetary policy to ensure price stability the snb is obliged by constitution and statute to pursue a monetary policy that serves the interests of the country as a whole. our task is to ensure price stability and, in so doing, to take due account of economic developments. stable prices benefit society across the board. inflation unsettles households and businesses, which can lead to costly mistakes when it comes to purchasing and investment decisions. but above all, price stability protects lower - income households, which are most exposed to the inflation - induced erosion of purchasing power. we equate price stability with a rise in consumer prices of between 0 % and 2 % per year. however, for over a year now, inflation in switzerland has exceeded this range ; it was 3. 2 % in the first quarter of 2023. inflation has risen even more sharply abroad. it reached a high of 9. 1 % last year in the us, and as much as 10. 6 % in the euro area. there are a number of reasons why inflation has risen globally in recent quarters. higher energy prices and supply bottlenecks caused by the pandemic and the war in ukraine were major drivers. but the strong increase in demand due to catch - up effects and expansionary monetary and fiscal policy

financial system is threatened. in such cases, we provide illiquid but solvent banks with emergency liquidity in the form of loans. this is contingent upon finma having confirmed the solvency of such banks. by granting these loans, we can calm the situation and buy time in which to overcome a crisis. the federal council may ultimately decide to use taxpayers'money to stabilise the situation, whether this be in the form of state participation, as with ubs in 2008, or in the form of guarantees, as now in the case of credit suisse. providing loans as lender of last resort in a crisis is one of the classic tasks of central banks. this task falls to central banks because only they are able to create liquidity in their own currency extremely quickly and in very large volumes. it is important to understand that even in crisis situations, this liquidity is not gifted. liquidity is lent against sufficient collateral and is subject to an interest rate that is higher than the policy rate. 2 / 4 bis - central bankers'speeches snb's contribution to managing credit suisse crisis this brings me to credit suisse. credit suisse has long struggled to cope with a loss of confidence and with outflows of client funds. the collapse of silicon valley bank in the us triggered a swift deterioration of the situation in mid - march, despite the fact that there was no direct link between the bank in california and credit suisse. credit suisse's counterparties cut credit limits and clients withdrew deposits at a rapid rate. if credit suisse had collapsed, many swiss households and smes would no longer have had access to their deposits, and payments via credit suisse would no longer have been executed. furthermore, smes in particular would no longer have been able to benefit from existing credit limits at credit suisse and maturing loans would not have been renewed. the economic fallout would have been enormous. but there was even more at stake here. the collapse of credit suisse would have sent a shockwave through the global financial system. the consequences for the real economy, both in switzerland and abroad, would have been dramatic. this extremely demanding situation required quick and decisive action. the federal government, finma and the snb worked together under high - pressure conditions to find a solution that was viable and as market - based as possible in order to safeguard financial stability and protect the swiss economy. you are all familiar with the solution that was ultimately found, namely the takeover