despite the massive losses incurred. however, our assessment is that, overall, risks in the big banks ’ books are still material. this is all the more serious since, compared to the end of 2007, the profit potential of the big banks is lower. banks with a domestic business focus, i. e. cantonal, regional and raiffeisen banks, present a much more favourable picture. although the overall profitability of these bank categories declined in 2008, it still remains above the long - term average. their capital base is high by historical standards and they were able to build up their liquidity reserves last year. however, for these banks, too, the economic downturn will represent an increasing challenge. the outlook for the banks is also shaped by the negative forecasts for the entire world economy. these suggest a substantial deterioration in credit quality – including for the figures published in our publication, banks in switzerland, are reported at parent company level, not at group, or consolidated level. according to these figures, the total loss for the big banks amounted to some chf 38 billion. cf. press release of 18 june 2009 on banks in switzerland for further details. switzerland. consequently, increasing loan losses, substantial reductions in earnings and a deterioration in the capital situation may be expected for a large number of banks. however, cantonal, regional and raiffeisen banks appear in relatively good shape to withstand these negative developments. the situation for the big banks appears more difficult. in addition to the still sizeable market risks, they face significant credit risks overall. simple comparisons with earlier crisis periods show that potential losses on traditional lending are high, when set in relation to the capital cushion. the longer and deeper the recession, the greater these potential losses will be. in our basis scenario we expect the economy to recover gradually as of 2010, both internationally and in switzerland. however, we cannot rule out a significantly deeper and longer - lasting recession than that forecast in the basis scenario. in this adverse scenario of a deep and long - lasting recession, large losses would be possible for banks with a domestic business focus as well as for big banks. such losses might lead to a depletion of a substantial share of the banks ’ current capital reserves. this might in turn impair market confidence in their soundness. given this risk potential, it is therefore essential that the big banks take all the necessary measures to ensure their resilience to any further significant deterioration in conditions. these measures include another reduction in their

to save and consume more, which should be reflected by an increased demand for gold. on the other hand, as financial markets and banking systems become more developed and more secure in today ’ s emerging economies, the palette of alternative saving vehicles will increase and we should expect the relative proportion of wealth invested in gold to decrease. in other words, we might expect the income effect to be strong at the beginning before receding and giving way to the substitution effect. conclusions despite the demonetisation of gold, the yellow metal continues to have a special significance for central banks. unlike currencies, the value of gold does not depend on a national sovereign. moreover, payment transactions with gold are fully under a central bank's control. these are two important reasons why gold, more than any other type of investment, serves to ensure the capacity to act in extreme crisis situations. from an investment viewpoint, the price of gold often moves in the opposite direction to other financial assets, in particular to the us dollar. the price for this'insurance function'is reflected in the fact that gold is less profitable in the long term than other financial assets. it is not surprising that switzerland, a small open developed country with a highly integrated financial sector and an ageing but relatively wealthy population, continues to invest a significant proportion of its reserves in gold. at present, the snb holds 1, 290 tonnes of gold or roughly 30 % of its assets. price fluctuations in both directions are to be expected and may be strong and sustained. as was the case in the past, such price fluctuations will modify the proportion of gold on our balance sheet from year to year. these short - term fluctuations should not give rise to great concern. experience has shown that extreme movements in markets tend to level out in the long run.