of course such solutions are not as easily taken off the shelf as plain vanilla lending. in particular any insurance contract is beset by moral hazard problems. while these could be addressed, unfortunately no pre - existing template exists for intergovernmental arrangements of this type, and most observers are sceptical that one could be put in place soon. if so, we must work with what we have, and that is the policy strategy worked out for the imf - eu programme. it has two main elements, which essentially continue and deepen existing policies. first, there is phased deficit reduction projected to bring government debt under control and declining by 2014. after the period of political uncertainty engendered by the run - up to the general election, the new government has reaffirmed the fiscal objectives of the programme and specifically to the 2011 and 2012 budgetary numbers. this is key to reducing risk and restoring confidence, but i will say no more about it here. second, accelerated resolution of the banking crisis for which we would have hoped to turn the corner already, but has proved to be on a scale which has challenged available policy tools. the banking strategy thus involves further recapitalisation and accelerated downsizing. the recapitalisation of the banks will take place following the completion of the 2011 stress tests which, in line with the programme commitments, will be much more granular, more explicitly transparent, and tougher, than those of 2010. last year ’ s task was not just a question of assessing future losses under a speculative stress scenario ; instead we were still trying to evaluate the losses already embedded in the existing portfolio resulting from the property price collapse that had already occurred, especially for development property. in normal times, a well - run bank with good loan appraisal procedures will be able to forecast its likely loan losses fairly accurately, especially if the likely macroeconomic prospects can be bis central bankers ’ speeches pinned - down. but when it becomes clear that banks have made substantial underwriting errors across a wide range of their portfolio to the extent that began to become evident in late 2008 and early 2009, the range of uncertainty balloons out. standard valuation practices that work for properly underwritten loans in normal times are ineffective in such an environment in predicting the enormous systemic losses that can occur. thus, over the past couple of years, a point estimate – a single number – has been more misleading than helpful in terms of understanding the range of loss possibilities. usually the validity of stress tests is revealed

the two elements on which our monetary policy is based – the negative interest rate and our willingness to intervene – are both helping to reduce pressure on the swiss franc. thus, despite periods of heightened uncertainty over the last few months, the franc has remained quite stable overall. furthermore, the negative interest rate has led to lower interest on the capital market, which is facilitating corporate financing. in other words, our expansionary monetary policy is effective. the negative interest rate and our willingness to intervene in the foreign exchange market continue to be both necessary and page 4 / 5 berne, 15 december 2016 thomas jordan news conference appropriate. this is because inflation is still very low, production capacity is not yet being fully utilised and the swiss franc continues to be significantly overvalued. our monetary policy stabilises price developments and supports economic activity in switzerland. ladies and gentlemen, thank you for your attention. it is now my pleasure to give the floor to fritz zurbrugg, who will speak about current developments in the area of financial stability. page 5 / 5