the moment essentially focused on larger firms with smaller ones probably suffering from restricted access to credit, in the swiss case, any diverging trend between big and small firms is not of major importance. rather, the difference is more accentuated for firms that are predominantly export - oriented as opposed to those oriented towards the internal market. on the export side, the ability of swiss exporters to continue redirecting their efforts towards the more dynamic regions of the world economy, in particular emerging asia may be a crucial test. this region is leading the world in terms of economic recovery from the crisis. it is clear here that the proponents of a reasonable version of the decoupling hypothesis are on the winning side of the intellectual debate. on a global level, inflation pressures are expected to remain subdued in most economies. in advanced economies, headline inflation is expected to pick up from near neutral levels in 2009, but remain low in 2010. for switzerland, the path of inflation in the short term will be largely dictated by recent movements in oil prices and associated base effects. inflation will nevertheless remain positive throughout 2010. this follows a negative rate of 0. 5 % in 2009. assuming that monetary policy remains unchanged, the snb ’ s forecast show that inflation will reach 0. 7 % this year. the snb ’ s forecasts also show that inflation will begin to increase again from the beginning of 2011, to reach 2 % in the first half of 2012. iii. policy challenges for the future 1. exit strategies for the snb, the return to normality does not pose any difficult conceptual problem. the unconventional measures developed to combat the current crisis have in part modified the nature of the liquidity created. liquidity resulting from repos and currency swaps is temporary : it flows back automatically when transactions are not renewed. liquidity created by acquiring foreign exchange and swiss franc bonds is more permanent. the issuance of snb bills routinely practiced since october 2008 has given the snb a tool that can play a central role in liquidity absorption. the next speaker, my colleague dewet moser, will concentrate on the more technical aspects of the exit strategy. suffice it to say that the toolbox is available. it is not a question of how, only of when. on the timing issue, because of the long and variable lags between monetary policy decisions and their impact on inflation, the decision to start tightening is a difficult one. it is necessary to balance the risk of moving too soon

times are good, while the public sector has to come to the rescue when times are bad. in an ideal world, it should now be the responsibility of the financial sector – rather than regulators – to come up with credible proposals for change. these proposals must inevitably imply that all the main players, in particular managers and creditors, have much more at stake than in the past. depending on how creative we are in finding solutions, financial institutions will have to be smaller and less prone to risk taking. for managers, at the very least, this must mean bonuses being tied to the long - run performance of their firm. logically, one could envisage going further. the first real source of asymmetry is the very principle of limited liability. beyond a certain level of remuneration and risk taking, one should ideally envisage a system which mimics that of partnerships or full personal liability. the fact that this is probably too ambitious justifies more ad - hoc complementary forms of regulation. shareholders have by and large paid their dues in the crisis, but creditors typically have not. this is the level at which there is most to gain in both correcting the incentives ( ultra - high leverage should worry creditors first, and regulators only afterwards ) and protecting tax payers. by definition banks rely a great deal on credit ; it is conceptually clear that creditors should come into play before taxpayers when something goes wrong. this would naturally be the case via bankruptcy proceedings. if we cannot go that far because of the crucial role of banks and certain financial institutions, we must find other ways for creditors to step in before taxpayers are involved. this can be achieved through ways of anticipating part of bankruptcy outcomes ( living wills ) or / and through some form of automatic conversion of a significant proportion of bank debt into equity. secondly, these considerations address the financial stability issue only through the lens of individual institutions. we now know that this is not enough. microprudence must be supplemented by macroprudence, i. e., a system design that encourages well - managed individual institutions to act, in particular at times of crisis, in ways that do not make life harder for other institutions under stress. the issue is clear, the perfect solution less obvious. at the moment, regulators are talking about dynamic provisioning or capital requirements conditional on the cycle phase. the key idea is that regulators may want to be more lenient in bad times so that individual institutions have more breathing room. if this is the case