fully understand the effects – and side - effects – of these new mechanisms at an early stage. the same goes for innovations affecting financial market infrastructures – especially those that are systemically important. such assessments of new technologies are based on a set of internationally accepted guidelines called ‘ principles for financial market infrastructures ’. 2 these principles define the criteria that infrastructures must meet, thereby setting standards for innovation in this field. central banks and regulators have a duty to pass legislation guaranteeing the safety of financial market infrastructures – by protecting their stability, resilience and availability, irrespective of technological change ; but they must also take on board the efficiency goals of infrastructure providers and their participants. regulatory adjustments may be needed to catalyse the positive effects of certain innovations. 3 cf. committee on payment and settlement systems ( now committee on payments and market infrastructures, cpmi ) and technical committee of the international organization of securities commissions ( iosco ), ‘ principles for financial market infrastructures ’, april 2012. the federal intermediated securities act ( fisa ) introduced in switzerland in 2008 is a good example of a regulatory change – in this case designed to manage the transition to dematerialised securities at central depositories. dematerialisation and the associated regulatory changes also significantly improved the efficiency and safety of repo settlement and hence of monetary policy implementation. page 3 / 6 from centralisation to decentralisation – how far should it go? until very recently, safety and efficiency were considered to be functions of centralisation. this trend is reflected in the evolution of central securities depositories 4 and in the emergence of cashless payment transactions. in switzerland, centralised clearing houses in the 1940s and centralised data processing in the 1970s were waypoints on a journey of convergence. this development culminated in the creation of the centralised ‘ swiss interbank clearing ’ ( sic ) payment system in 1987. 5 another – more recent – example is the settlement of otc derivatives via central counterparties. 6 this centralisation process and related economies of scale both reduced costs and improved safety. however, with the arrival of the latest technologies, these third - party clearing and settlement services are increasingly seen as superfluous cost factors ; the keywords here are ‘ distributed ledger ’ and ‘ blockchain ’. 7 the underlying technology promises first and foremost to reduce costs. for instance, such systems would render the reconciliation of transaction and balance data between banks and a third - party system obsolete. the paradigm

in the quarters to come. although some recently released indicators point to a slight stabilization, we project the swiss economy to grow only weakly over the next few quarters. moreover, as mentioned before, there is a very high degree of uncertainty regarding the global outlook. this is also true for the swiss economy, which depends particularly on economic conditions in the euro area. if the risk scenario of a further escalation of the debt crisis were to materialize, economic activity in switzerland would suffer a much more pronounced slowdown than just described. such a development would lead to a severe risk of deflation. current swiss monetary policy given this highly uncertain outlook, the snb is – more than ever – committed to enforcing the minimum exchange rate with the utmost determination at any time. we cannot allow the swiss franc to appreciate further. hence, we must continue with our current policy, in particular as interest rates are already around zero. to enforce this policy, we are prepared to buy foreign currency in unlimited quantities, if necessary. moreover, we stand ready to take further measures if the economic outlook and the risk of deflation so require. by setting a minimum exchange rate, we have opted for a simple and clear policy, to which we are fully committed. for precisely these reasons, this policy has been absolutely credible to the markets. before concluding, let me elaborate on two potential side effects which are often discussed in the context of our current monetary policy. on the one hand, it is argued that the significant increase in liquidity since august 2011 may trigger inflation risks in the longer term. given the current economic situation, however, expanding the supply of liquidity was a necessary monetary policy response. there is currently absolutely no risk of inflation in switzerland. first, headline inflation turned negative in october 2011 and continued to decline through the end of the year. it is assumed to fall even further in early 2012. second, neither our inflation forecasts nor the medium - term inflation expectations from our surveys of households and companies show any signs of bis central bankers ’ speeches inflation risks. consequently, there is no necessity whatsoever for the snb to reduce the level of liquidity for the time being. on the other hand, a long period of very low interest rates may lead to imbalances in the domestic credit and real estate markets, which may pose serious risks for financial stability. we are well aware of these risks and are analyzing them very carefully. however, due to the exceptional monetary policy situation, interest rates cannot readily be