jean - pierre roth : steps to strengthen the swiss financial system introductory remarks by mr jean - pierre roth, chairman of the governing board of the swiss national bank and chairman of the board of directors of the bank for international settlements, at the news conference, bern, 16 october 2008. * * * pursuant to art. 5 of the swiss national bank act ( nba ), the snb shall contribute to the development of our economy and the proper functioning of our monetary system. this is why the snb has decided to extend a loan not exceeding usd 54 billion to the special purpose vehicle ( spv ) set up to take over illiquid assets currently held by ubs. a similar offer has also been extended to the cs group, which has refrained from making use of such a possibility. for the snb, this operation is highly unusual, both with regard to its scope and the reasons for it. scope of operation as to the scope of the operation, usd 54 billion is clearly a substantial amount for the national bank. i would like to emphasise, however, that the loan amount is entirely guaranteed by the portfolio assigned by ubs, i. e. securities valued at usd 60 billion in the ubs balance sheet. given the fact that in the past twelve months, ubs has made aggressive write - downs on its risky positions and that its portfolio is fairly diversified ( it does not only consist of toxic assets ), we feel that the risk of further losses on this portfolio is limited. we will, in any event, reassess the value of each portfolio component before making the transfer to the special purpose vehicle. the lowest valuation will be applied. to secure initial financing for the operation, we will obtain us dollars through a dollar - swissfranc swap with the federal reserve. thereafter, we will turn to the market for refinancing. the snb will therefore not incur any currency risk. since the entire operation will be effected in us dollars, it will not affect the national bank's monetary policy in any way. reasons for operation this operation is nevertheless unprecedented with regard to the reasons for it. in carrying it out, we are making a contribution to an essential element of the swiss financial system, at a time when financial markets have been in turmoil for some months now. a better functioning of the financial markets – in particular the banking sector – is essential so that our country will be able to weather the economic difficulties resulting from the anticipated global economic slowdown

it also be able to take more preventative action in the future. this is the only way the snb can guard effectively against future crises. preventative action is only possible if the national bank has efficient and effective instruments at its disposal. however, there is currently a glaring deficiency in this area. up until now, the only precautionary measure the snb could employ was to issue a warning. yet experience has shown that warnings alone are not enough. before the crisis, the national bank had repeatedly drawn attention to the high leverage of the big banks and warned that their ability to absorb losses was not adequate. these caveats did not result in any voluntary change in behaviour. for this reason, it is essential that our set of preventative instruments for financial stability be improved in three areas ; namely, improved access to information, closer involvement in regulatory procedures with regard to financial stability issues, and direct macroprudential decision - making powers. i would now like to take a closer look at these. first, it is crucial that we have all the necessary information quickly to hand in order to identify the build - up of risks in the financial system at an early stage. while the snb ’ s statutory authority to compile statistical data is both necessary and helpful, the latest crisis clearly demonstrated that the national bank must be able to request additional information. with this i mean, for example, quantitative, non - standardised data on banks ’ risk exposure. unlike finma, switzerland ’ s financial market supervisory authority, the snb ’ s stance is primarily a macroeconomic or systemic one. this is why we must be able to act independently in certain situations when gathering information. at the same time, we also want to keep our access to information to an absolute minimum and avoid a duplication of activities with finma. second, clarification of the snb ’ s participation rights and obligations is needed in the area of regulation essential for financial stability. in order to give appropriate consideration to financial stability aspects, we feel that the snb should be involved in regulatory procedures at an early stage. in other words, in the conceptual phase. the authorities responsible for issuing financial market regulations should, therefore, be obliged to consult with the snb early on in the process. thirdly, the national bank must have clearly defined decision - making powers with regard to regulations that either bear direct relation to monetary policy or to emergency liquidity assistance. i would like to take two current regulatory proposals to explain