the range of available assets considerably. it therefore places particular emphasis on researching new investment opportunities, whether these be equities, currencies or markets. hence, for example, the recent introduction of new currencies or the inclusion of additional countries, in order to better achieve a satisfactory degree of diversification. third challenge : investing our portfolio without influencing the markets. the rapid growth of our reserves required us to invest and reinvest large amounts. amounts of this magnitude can have an impact on the stock, bond or money markets. this is why the snb bis central bankers ’ speeches operates on the major markets and does not invest in niche markets. moreover, to ensure that our investments do not destabilise the markets, we place amounts which they can easily absorb. this implies that any diversification after a large inflow of foreign exchange reserves must be gradual. we are also engaged in active discussion with our partners, the central banks of the countries where we invest, and we are pursuing an information policy in this area that is as transparent as possible. fourth challenge : maintaining an optimal proportion of equities in our portfolio. despite the recent significant inflow of foreign exchange reserves, we have increased the proportion of equities, and it now stands at nearly 12 %. many observers of the snb ’ s activities have expressed a desire that this proportion be larger. yet such an increase is not without risk. while the inclusion of equities in a portfolio can reduce the risk profile as a result of the diversification effect, this is only true up to a certain level. we estimate this level of equities to be between zero and 5 % of the portfolio. while a higher share would naturally translate into a higher return on the portfolio, it would also mean incurring greater risk. any increase in the proportion of equities must therefore be analysed from two vantage points : return and risk. additional risk can run contrary to the criterion of security that the snb applies to its investments. let me now turn to the fifth and last challenge : managing exchange rate risk. the return on foreign exchange reserves essentially fluctuates in line with changes in local currency returns versus swiss franc returns. this exposure to exchange rate risk is the result of the snb ’ s monetary policy. it thus forms, so to speak, part the dna of a central bank ’ s activities in a small open economy such as ours. eliminating this risk would go against

jean - pierre roth : the population is ageing - we cannot wait any longer! summary of a speech by mr jean - pierre roth, chairman of the governing board of the swiss national bank, at the association suisse des actuaires, basel, 17 june 2005. the complete speech can be found in french on the swiss national bank ’ s website ( www. snb. ch ). * * * like other developed countries, switzerland has been hard hit by the phenomenon of demographic ageing. it is putting our old age pension scheme to a severe test. the ageing of the population is also impacting on our ability to innovate, our potential to achieve productivity gains and our competitive dynamism in a globalised and demographically diversified world. this is why measures need to be put in place quickly. at the heart of this demographic challenge lies the need to enhance the productivity of our economy as well as our productive capacity. it is all the more important to secure favourable growth conditions because the ageing of the population in itself could impact negatively upon our capacity for growth – which is under strain already now. increasing the productivity of our economy and the pace of growth is essential if we wish to maintain our system of social security. at the macroeconomic level, the financing of old age pensions works according to a simple principle. this involves imposing a levy on the incomes of the working population and transferring these funds to pensioners, either through redistribution in the present ( pay - as - you - go system ) or via a capital funding system which benefits future generations of senior citizens. thus, demographic ageing means that the working population is obliged to shoulder ever greater levies. if, at the same time, the global creation of wealth progresses slowly, the responsibility of financing old age pensions is going to impose an increasing social burden. thus, it is not only necessary to improve our economic efficiency, we also need to be careful not to impede these efforts through inappropriate measures. we must allow the invisible hand of competition to bring about the most efficient allocation of our resources possible in both the domestic and the foreign arenas. consequently, we need to do more with the resources at our disposal. at the same time, we need to make sure we have access to better quality resources. this means taking a longer - term approach to our system of education. the conditions within which our economy operates also play an important role. growth in investment activity not only allows us to create new jobs but also