feel it is important to stress that considerable risks accompany on such interventions. first, market interventions aimed at preventing an appreciation expand the snb ’ s balance sheet. when there is a fixed exchange rate target, one might even have to expect an uncontrolled expansion of the balance sheet. this is attached to a number of imponderables. 6 in addition to major financial risks, it should be noted that, as the balance sheet grows, it will become increasingly difficult to reduce excess liquidity during a subsequent normalisation of monetary policy, and to fulfil the monetary policy mandate – of ensuring price stability – sustainably. second, it is important to bear the following in mind : pegging the franc partially or fully to another currency would mean that the snb would have to adopt the monetary policy of the cf. also danthine, j. - p. ( 2015 ) : swiss monetary policy facts... and fiction, speech at the swiss finance institute evening seminar, geneva, 19 may 2015. bis central bankers ’ speeches currency area concerned. however, it could no longer be guaranteed that this monetary policy would always be optimally tailored to the needs of the swiss economy. thus, the benefits of an active exchange rate policy need to be properly weighed against the costs for the economy as a whole. but there is no one - size - fits - all method of determining the need to intervene in the foreign exchange market, or the best way to do so. the points to consider will differ depending on the situation. current snb monetary policy in that regard, i would like to briefly describe the snb ’ s current thinking. at its most recent monetary policy assessment about a month ago, the snb published its new inflation forecast. the forecast shows that, assuming an unchanged interest rate policy, inflation will rise gradually over the coming quarters, and will exceed 1. 0 % in 2018 ( cf. chart 12 ). so the forecast suggests that current monetary policy is appropriate. for this reason, in december the snb decided to continue its expansionary policy. this is based on two elements : first, an interest rate of – 0. 75 % on sight deposits at the snb combined with a target range for the three - month libor of between – 1. 25 % and – 0. 25 % ; second, the snb ’ s willingness to influence exchange rate developments if necessary. the negative interest rate and the willingness to intervene on the foreign exchange market serve

jean - pierre danthine : the swiss national bank ’ s 2012 financial stability report speech by mr jean - pierre danthine, vice chairman of the governing board of the swiss national bank, at the media news conference of the swiss national bank, berne, 14 june 2012. * * * introductory remarks by jean - pierre danthine i, too, would like to welcome you to this news conference, which for me is also the occasion to present the 2012 edition of the swiss national bank ’ s financial stability report. the report contains the snb ’ s assessment of the risks to the stability of the swiss banking system, and of the need for action. this promotes risk awareness among swiss banking sector agents, thereby contributing to financial stability. introduction economic and financial conditions for the swiss banking sector have deteriorated since the last financial stability report. the sovereign debt crisis escalated, threatening to spill over from peripheral euro area countries to the core countries of the euro area. in addition, global economic growth lost momentum and tensions grew in the international banking system. there was, likewise, no easing of tension on the swiss mortgage and real estate markets. the momentum observed in real estate prices and mortgages continued. as my colleague, thomas jordan, has already mentioned, under its baseline scenario the snb expects a gradual improvement in economic and financial conditions over the next 12 months. although this is considered to be the most likely scenario, the risk of a renewed deterioration in the environment remains high. in the short term, under the adverse scenario there could be a substantial price correction on financial markets, and economic growth could slow markedly. such a scenario would affect the two big banks in particular. for domestically focused commercial banks, the main risk stems from a potential fall in swiss real estate prices over the medium term. this risk increases the more market prices diverge from those justified by fundamentals. given the high risks in the economic and financial environment, the snb considers that there is a need for action by big banks and domestically focused commercial banks alike. the snb ’ s recommendations are aimed at strengthening the resilience of the swiss banking system, to ensure that it is in a position to continue performing its essential functions for the swiss economy, even if the adverse scenario i have just described were to materialise. situation at the big banks i would now like to present the key points of our assessment of the big banks. since june 2011, both big banks have made further progress in improving their resilience ;