philipp hildebrand : banking regulation – changing the rules of the game speech by mr philipp hildebrand, vice - chairman of the governing board of the swiss national bank, at the twelfth annual international banking conference, federal reserve bank of chicago, chicago, 25 september 2009. i would like to thank jurg blum, rita kobel, and signe krogstrup for their valuable support in drafting this speech. i also want to thank bertrand rime for helpful comments and discussions. * * * introduction i want to thank the federal reserve bank of chicago for the kind invitation and the opportunity to speak to you this evening. it is a privilege to be here. a year ago, we were in the midst of a perfect financial storm. following the bankruptcy of lehman brothers in midseptember, the imminent collapse of the global financial system became a distinct possibility. to avert such an outcome, a bold and unprecedented international policy response was needed and promptly initiated. in the us as well as in europe, several of the world ’ s largest financial institutions required public capital injections, and their nondeposit liabilities had to be guaranteed. a number of countries were forced to expand their deposit insurance programs. in some cases, governments or central banks purchased or guaranteed bank assets. 1 in spite of the rapid policy response aimed at stabilizing the global financial system, the broader economy was heavily hit. trade and industrial production literally fell off a cliff. in the fourth quarter of 2008 and the first quarter of 2009, global economic activity recorded its weakest performance in decades. today, the situation has improved very significantly. the unprecedented global policy response has had its intended effect. the financial system is showing clear signs of stabilization. incoming economic data over the last couple of weeks suggest that global economic activity is improving. the economic rebound in the coming months may even exceed expectations. at the same time, looking beyond the near term horizon, our economies and the financial system continue to face considerable uncertainties and challenges. yet, certain parts of the financial industry appear tempted to go back to business as usual. industry statements and comments made by some banks on regulatory reforms reflect this trend. ladies and gentlemen, i am deeply convinced that it is our common responsibility and duty not to let this happen. let me begin by laying out three hopefully compelling reasons why we must secure fundamental regulatory reform of the financial sector. the first reason is that too much of the risk taken in the financial sector ultimately resides

thomas jordan : monetary policy and government debt – different perspectives summary of a speech by mr thomas jordan, member of the governing board of the swiss national bank, at the 13th zermatter symposium, zermatt, 28 august 2007. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * the effects of fiscal and monetary policy overlap. fiscal policy can have a cyclical effect, while monetary policy can also generate income for the government. however, theory and practise have shown that, first and foremost, monetary policy must be used to ensure price stability and – to a limited extent – to dampen economic fluctuations. the principal aim of fiscal policy, however, must be to ensure that the national budget is financed as efficiently as possible. when government debt levels are high and budget deficits get out of hand, they pose a significant threat to a monetary policy that is geared to stability. misusing monetary policy as an instrument of fiscal policy inevitably leads to a loss of purchasing power. many episodes of high inflation have come about, ultimately, as the result of funding requirements on the part of the state. nowadays, the independence of many central banks shields them – to a large extent – from the fiscal greed of politicians. nevertheless, time and time again, when government finances have fallen into disarray, central banks have been seen to come under political pressure. from a monetary viewpoint, however, government debt is not entirely unwelcome. on the contrary, government debt is a vital ingredient of modern monetary policy. a liquid market for government bonds is a prerequisite for a modern and efficient financial market. functioning financial markets, in turn, are necessary for an efficient monetary policy : a liquid market for governments bonds enhances the efficiency of the monetary transmission mechanism. yields on government bonds and indicators derived from these yields are an important source of information for the monetary policy decision making process. finally, in implementing government policy, government bonds serve as collateral. sound government finances are a prerequisite for the long - term success of monetary policy and for maintaining price stability. however, healthy government finances do not necessarily imply zero government debt. for the functioning of financial markets and an efficient monetary policy, a liquid market for government bonds is a considerable advantage.