in measuring risk. diversified shareholders with comparatively short investment horizons can demand overly ambitious returns. competitive pressures encourage risk taking. the typical features of contracts and remuneration schedules for traders and money managers can have a similar effect. the same is true of “ herd instinct ”, namely the tendency to conform behaviour to the norm, or to the presumed better informed, for fear of being left behind and in the hope of limiting blame in the event of failure. and perceptions of official “ safety nets ” can play a similar role. in different ways and to varying degrees, all of these forms of behaviour share a common characteristic : they may seem reasonable, even compelling, when considered in isolation, but they can result in undesirable outcomes once the system - wide impact of collective action is taken into account. iii. implications for regulatory and supervisory policy a strengthening of the macro - prudential orientation in the regulatory and supervisory framework would have implications for the relative weight assigned to different objectives, for the treatment of different institutions at a point in time, and for the assessment and mitigation of risk over time. consider each of these in turn. in terms of objectives, a strengthening of the macro - prudential orientation would call for a further broadening of focus away from narrow depositor protection and towards systemic concerns. its main benefit would be to permit a better balance between official intervention and market discipline. in turn, this could be conducive to sounder individual institutions too. at least in the public ’ s eye, the failure of individual institutions tends to be identified with the failure of supervisors to perform their duties. this considerably complicates their task, encouraging forbearance rather than orderly exit. implementing the shift requires that specific means be in place to protect depositors in the event of failure, relieving public pressure to forbear and adding to the credibility of the exit threat. targeted deposit insurance schemes can play a useful role in this context. in terms of the treatment of different institutions at a point in time, the shift in focus would imply the calibration of regulatory and supervisory arrangements to the institutions ’ systemic significance. higher costs of failure for the system call for a higher degree of comfort in the soundness of the institutions that generate them. the greater difficulties in ensuring ex post their orderly exit further supports this view. one way of implementing a calibrated approach would be through the supervisory review process. in fact, in several supervisory jurisdictions the authorities are already

of reserves, this would be unwise. dear shareholders dear guests the swiss national bank must retain the confidence of the population and the markets if it is to conduct its policies effectively. the cosa initiative is playing with fire. it constitutes a permanent invitation to press never - ending financial demands. it places the snb at the centre of a permanent political debate which threatens both its credibility and the effectiveness of its policies. that is why good sense dictates that it be rejected. the snb needs the support of everyone in this tricky phase and, in particular, the support of its shareholders. i would like to thank you for your attendance today, and for your continual interest in our activities.