system ’ s average interest burden had been rising since 2015, mainly due to the foreign exchange market interventions undertaken for monetary policy purposes ; this burden declined following the revision of the exemption threshold regime and the threshold increases. the average interest rate on all sight deposits is currently around −0. 2 % and is thus less than a third of what it would be in a system without exemptions. the exemption threshold of a bank is calculated as a fixed multiple of its minimum reserve requirement, which itself is a function of its short - term liabilities. thus, a bank with a higher stock of short - term, safe assets ( including repos ) relative to its short - term liabilities receives a relatively lower exemption threshold as a share of its short - term, safe assets. when first introduced, the banks ’ exemption thresholds were static, in the sense that they were calculated on the basis of a fixed reference period, viz., october 2014. with the november 2019 adjustment, banks ’ exemption thresholds became dynamic, in the sense that the reference period over which the exemption thresholds are calculated is updated each month as the sliding window over the preceding 36 months. starting in january 2015, a bank ’ s exemption threshold was determined as 20 times its minimum reserve requirement, based on the october 2014 reference period. with the november 2019 adjustment, its exemption threshold was raised to 25 times ( raised further to 30 on 1 april 2020 ) its minimum reserve requirement, using a moving average of the minimum reserve requirements over the preceding 36 months. page 9 / 13 the increases in the exemption thresholds also broadened the scope for additional liquidity redistribution, causing trading volume on the repo market to rise. indeed, repo market trading volume, shown by the vertical blue bars in chart 4, increased substantially in november 2019, as did the number of banks active on the repo market. let us now take a closer look at the impact of the exemption threshold adjustments on the repo market and, in particular, at the tools the snb has deployed to ensure that secured money market rates remain close to its policy rate. the role of snb monetary policy operations in the money market the increases in the aggregate exemption thresholds have changed the dynamics in the repo market, as they simultaneously caused the demand for liquidity to rise and the supply of liquidity to fall in the repo market. with more demand for liquidity and less supply, the cashproviding banks were able to achieve higher, i

speech embargo 5 november 2020, 4. 00 pm monetary policy implementation : how to steer interest rates in negative territory virtual money market event andrea m. maechler and thomas moser∗ member of the governing board / alternate member of the governing board swiss national bank webcast, 5 november 2020 © swiss national bank, zurich, 2020 ∗ the speakers would like to thank peter kuster and tanja zehnder for their valuable support and astute insights when drafting this speech. they also thank roman baumann and mico loretan for their comments as well as snb language services for the translations of the text. page 1 / 13 ladies and gentlemen good afternoon to all of you. on behalf of my colleague thomas moser and myself, i would like to welcome you warmly to the swiss national bank ’ s first - ever virtual money market event. i am delighted that we are all able to interact in this way, even though the circumstances which necessitate the virtual format are anything but pleasant. the coronavirus crisis has turned the lives of billions of people upside down. many have contracted or even died from the disease, and many others have lost their jobs as a result of it. given all of this, the fact that the snb has been forced to break with an almost twenty - year tradition and refrain from holding a physical money market event is little more than a side - note. but it is regrettable all the same. the coronavirus crisis generated significant turbulence in financial markets when it surfaced in february and march. the leading central banks eased their monetary policy stance, and many made use of the standing us dollar swap lines to enhance the provision of global us dollar liquidity. investor sentiment improved substantially beginning in late march on the back of large - scale fiscal and monetary support programmes launched in many countries, including switzerland. bolstered by these programmes and the eventual relaxation of public health policy restrictions, financial markets continued their recovery until late summer, and economic activity also picked up considerably. however, developments in recent days and weeks have made it clear that the coronavirus crisis is not over and that uncertainty remains high. in switzerland, the snb has repeatedly reaffirmed its expansionary monetary policy. in so doing, it has made an important contribution in terms of immediate crisis management. some of the instruments the snb has marshalled to manage the coronavirus crisis are well known. the negative interest rate on banks ’ sight deposits held at the snb and our willingness to