of leverage, excessive risk taking and compensation. a wide range of measures will address problems caused by institutions that are too big to fail. these include a systemic risk capital surcharge, recovery plans and organisational measures. the systemically important banks will have to adjust to these measures. this process will take time and will not occur overnight. implications for the swiss national bank i have discussed the challenges that arise for switzerland as a financial centre from the snb ’ s perspective. our mandate is to maintain price stability, while taking due account of the development of the economy. to ensure that we can always conform to this mandate, we need a stable banking system. monetary policy transmission could not work properly without such a system. at the same time, it is equally important that the financial system itself is not a source of excessive risk for the rest of the economy. our efforts are thus concentrated on increasing resilience by mitigating systemic risk. to ensure this, we work closely with the financial market supervisory authority, finma, the federal department of finance and various international standard - setting bodies. a great deal has been achieved in our country so far. one of these achievements is the countercyclical capital buffer ( ccb ) 7, which has recently generated a number of headlines. as you know, the snb has, for the time being, decided against proposing the activation of the ccb. there are two reasons for this. first, as i have already mentioned, we have observed some indications of a possible slowdown of price momentum in the market for residential real estate. second, two other measures came into effect at the beginning of june – stricter capital requirements for mortgages and a revision of the self - regulation rules for mortgage lending. however, this is far from an all - clear for the real estate market – i want to underline again that the risk of a further build - up of imbalances followed by a significant price correction is cf. snb press release, 27 august 2012. cf. snb, financial stability report, 2011 and 2012 cf. snb fact sheet “ implementing the countercyclical capital buffer in switzerland : concretising the swiss national bank ’ s role. ” bis central bankers ’ speeches still present. the ccb is a key element in the package of measures recently approved by the federal council. these measures should help to mitigate the risks to financial stability from imbalances developing in the real estate and mortgage market.

centre. this orientation also implies that its business is diversified and less dependent on the domestic economy. for example, during the swiss real estate crisis of the 1990s, profitable international business activity helped to stabilise the banking sector. however, the downside of the international focus is that susceptibility to foreign shocks is considerable. because foreign business is sizeable, shocks abroad can cause substantial losses for swiss banks. an example of this are the huge losses some swiss banks have experienced in recent years due to their us subprime mortgage positions. where banks have to absorb such losses on their balance sheet, they may encounter refinancing difficulties and be forced to sell assets at any price. this may in turn lead them to cut back their credit supply, and the monetary transmission mechanism may be impaired 4. in the worst case, the financial system could be destabilised, threatening the whole economy. fortunately the swiss economy has not suffered a credit crunch – not even in 2008 and 2009. a package of public sector measures greatly contributed to the stabilisation of the swiss financial system. to sum up, our economy is especially susceptible to financial shocks due both to the size of the swiss financial industry and its international exposure. as a consequence, a major challenge that arises for switzerland as a financial centre is to make sure the banking sector is resilient so it can cushion shocks when they occur. otherwise the financial industry will be unable to fulfil its role as a financial intermediary. a lot has been achieved in recent years to strengthen the resilience of the banking system. in particular, the two big banks have made progress in this area. they have increased their highest - quality capital and reduced their risk - weighted assets. this is an on - going process that will further increase the stability of the system. challenges for the financial industry ladies and gentlemen, so far i have focused on the macroeconomic challenges arising from the importance of the financial industry for the economy. let me now turn to the challenges the swiss financial industry itself faces. obviously, like its peers abroad, the swiss financial industry has to cope with several challenges. let me focus on three which i consider to be most relevant for switzerland – wealth management, residential mortgages and regulatory measures addressing “ too big to fail ” issues. wealth management is challenged on several fronts. revenues in wealth management will continue to be depressed. in jittery financial markets, client trading volumes are low. the flat yield curve reduces the