companies, which had declined over the past five years, have also risen again since the beginning of the year. prices continue to increase in the real estate market, a development to which, in our view, the low mortgage rates have contributed. well aware that our monetary policy is still expansionary, we are keeping a close eye on developments in the real estate sector. in view of the above - mentioned developments, we have decided to leave the target range for the three - month libor rate unchanged at 0. 25 - 1. 25 %. what were the most important factors that led to this decision? there were three of them. first of all, we needed to downgrade our expectations with respect to the development of the economy. however, there are no signs of any cyclical downturn and the economy continues to recover, even if this recovery is somewhat delayed and muted. second, the lacklustre economic activity is being accompanied by an improvement in the medium - term outlook for inflation. this means that an increase in the libor target range appears less urgent. third, the level of uncertainty has risen. the economic outlook in europe is more difficult to assess than it was in march. although the price of oil declined in april and may, it rose again significantly in june, and high prices in the oil market could persist for some time to come. in addition, the decline in the level of long - term interest rates is not very consistent with a recovery in the economy. i will now briefly outline our new forecast for inflation. the graph depicts the current and the previous forecasts. the dashed red curve represents the new forecast, which covers the period from the second quarter of 2005 to the first quarter of 2008. the dash - dotted green curve shows the forecast presented in the last monetary policy assessment. both forecasts are based on the assumption of a three - month libor rate of 0. 75 %. the line representing the new inflation forecast begins slightly above the previous forecast, dropping significantly below it from next year onwards. the decline in inflation rates this year is due to a stabilisation in the price of oil. the lower level of inflation next year is attributable to weaker growth in economic activity. in 2007, inflation will rise rapidly because of the high level of utilisation of resources and the high level of liquidity. this means that, should the three - month libor rate remain unchanged at 0. 75 %, inflation would reach 2. 4 % by

thomas jordan : bank regulation – what went wrong? what will improve? summary of a speech by mr thomas jordan, vice - chairman of the governing board of the swiss national bank, at the forum fur universitat und gesellschaft, berne, 24 march 2010. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * the financial crisis has caused enormous damage. massive losses were recorded in the global banking system. many countries have gone through the worst recession since the second world war. government rescue measures had to be implemented to stabilise the financial system. existing bank regulations were not able to prevent the crisis, nor were they able to at least contain the damage to such an extent that government rescue packages would not have become necessary. while before the financial crisis, there was considerable uncertainty about possible shortcomings in bank regulation, these have now become apparent and will have to be tackled. in addition, the provision of implicit state guarantees has made the need for action even more urgent. big banks – believing that they will receive government assistance if they run into problems – have even stronger incentives now to take on excessive risk. this increases the risk of another crisis and erodes the fundamental principle of the market economy – competition. once again, in the future, banks will have to bear their own risks. the failure of a bank should no longer jeopardise the stability of our financial system. only then, will our financial system become less prone to risk and will the extent of future crises clearly decrease. in order to achieve this goal, several measures have been decided on in switzerland. first, new capital adequacy requirements were enacted in 2008. big banks will have to double their risk - weighted capital. in addition, they will have to hold a minimum amount of equity capital, irrespective of the risk models they use internally. this is because the crisis has shown that internal risk models massively underestimated the risks taken. second, new liquidity regulations will be adopted. in the future, big banks will have to hold a sufficient amount of high - quality liquid funds to be able to cover unexpected liquidity losses for a period of at least 30 days. the reason for this is that, in the financial crisis, even solvent banks had liquidity problems. finally, measures to solve the “ too big to fail ” issue must be put into practice. no bank should be so systemically