. for example, a popular initiative launched this spring seeks to amend the constitution to give the snb a direct role in financing the national pension scheme. before i delve into why the direct financing of government tasks by the snb is not in keeping with the principles of regulatory policy, it is helpful to first contextualise the snb ’ s profit development. for it is likely that the increase in these desires is tied above all to the growth of our balance sheet and our high profits in the past few years. these high profits have led to an increase in our so - called distribution reserve. at the end of 2021, it amounted to chf 103 billion. the distribution reserve exists because the snb does not pay out all of the distributable profit at once. 1 it corresponds to a profit or loss carried forward in the balance sheet and is part of the snb ’ s equity capital. the distribution reserve helps to smooth the annual distributions to the confederation and the cantons by serving as a buffer that balances out the fluctuations between years with profits and years with losses. for more information on the distribution approach, cf. jordan, thomas j. ( 2021 ), snb distributions – not a matter of course even when profits are high, speech held at the 113th ordinary general meeting of shareholders, zurich, 30 april 2021. page 3 / 5 the level of the distribution reserve in recent years has led some observers to overestimate the potential for snb distributions and view the annual distribution of up to chf 6 billion as too low. however, the good results of the past few years were achieved during an exceptional financial market environment shaped by globally declining interest rates, low inflation, high liquidity and rising share prices. but this environment has now changed sharply. in the first half of 2022, interest rates increased worldwide and stock markets declined, leading to considerable price losses on the snb ’ s bonds and shares. the accumulated book profits from the past were reversed by a book loss. the snb recorded a loss of around chf 95 billion for the first half of 2022, which corresponds to almost the entire distribution reserve. the current profit distribution approach is therefore not – as has often been criticised – overly cautious. the loss in the first half of the year underlines that a larger balance sheet is accompanied by larger fluctuations in absolute terms in the annual result, and that substantial profits can be followed by substantial losses. this clearly demonstrates why the government must not

is a cornerstone of our economic system. it is the tool whereby capital that is not needed at one point in the system can be used productively elsewhere. the credit system facilitates projects – in the areas of consumption and investment alike – which would not be possible otherwise, and thereby makes our economy dynamic and flexible. this promotes growth and prosperity. money and credit have always been closely linked. today, money creation and lending take place in a two - tier system, namely via the snb and the commercial banks. the snb provides banks with so - called central bank money in exchange for financial assets. they can hold this central bank money as sight deposits at the snb or withdraw it as banknotes. banks use central bank money to carry out transfers for their customers and for customer withdrawals. equally, the commercial banks need central bank money for paying out loans. these payments lead in turn to the creation of new money in the banking system. what exactly happens when credit is granted? the process always begins with the bank customer, for example when he or she applies for a mortgage loan. the bank then has to page 2 / 8 check whether the customer is creditworthy and whether the loan is economically viable from a risk / return perspective. furthermore, the bank must determine whether it has, or whether it can obtain, sufficient central bank money to pay out the loan. the payment is usually made electronically by crediting the house seller ’ s sight deposit account, which is generally held at another bank. consequently, overall sight deposits in the banking system rise and new money is created. although money created when a loan is granted is not central bank money, private customers ’ sight deposits at commercial banks have equal status in payment transactions and can also be exchanged by customers for snb banknotes at any time. on the one hand, payments into sight deposits – for instance customers ’ salary payments or proceeds of selling their house – are an important source of central bank money for banks. on the other hand, this liquidity can flow out again rapidly since customers are able to access their sight deposits at any time. yet, it is not usually the case that all of a bank ’ s customers simultaneously want to withdraw all of their savings or use them for payments. as a result, the bank does not need to hold ready an equivalent value of central bank money for every franc of sight deposits ; it can use some of this liquidity for granting and paying out loans. one point i would like to stress here