fritz zurbrugg : review of financial market developments, and various interest rate and foreign exchange benchmark reforms introductory remarks by mr fritz zurbrugg, member of the governing board of the swiss national bank, at the media news conference of the swiss national bank, berne, 1 december 2014. * * * in my remarks, i will begin by talking about developments on financial markets since the middle of the year. then i will speak about the various reform efforts in the area of interest rate and foreign exchange benchmarks. developments on the financial markets after a lengthy period of calm, volatility has increased slightly on the financial markets since the middle of the year. in addition, investors ’ appetite for risk has dipped at times, and the risk markets have suffered temporary setbacks. thus we have observed two waves of selling on the stock markets over the past few months ( cf. chart 1 ). at the end of july, the european stock markets, in particular, were affected, while those in the us and the emerging economies proved more resilient. the second, more serious wave of selling set in at the end of september, making a significant impact on the major non - european markets as well. the main trigger for both waves was unexpectedly weak economic data in the core economies of the euro area and japan. to some extent, this negative effect was aggravated by geopolitical tensions. however, chart 1 also shows that these waves of selling were relatively short - lived. a number of share indices, including the s & p 500 in the us and the spi in switzerland, rapidly made good their losses and have in fact attained new highs in the meantime. important share indices within the euro area, such as the euro stoxx 50, have also been able to recoup their losses, and their most recent levels roughly matched those of mid - year. apart from the continued recovery of the economy in the us and the predominantly sound corporate profits on both sides of the atlantic, the fact that central banks in the euro area, japan and china have eased their monetary policies is likely to have played an important role in this regard. looking at interest rates, yields on government bonds have continued to decline. this is partly a reflection of low inflation and the decline in inflation expectations in the major advanced economies. the fall in yields has been particularly marked in the euro area, where investors are expecting further monetary policy easing measures. accordingly, yields on tenyear german government bonds have come down

mentioned before, in addition to improvements in the existing libor interest rates, the fsb also proposes that alternative benchmark interest rates be developed. in switzerland, alternative interest rates for very short - term swiss franc transactions already exist. an example of these on the secured money market is saron, 2 which is the basis for the interest rate curve on the swiss franc repo market. on the unsecured market we have the tois3 fixing, which is related to transactions in the area of call money and is used for interest rate derivatives. however, reforms were also necessary for the tois fixing. consequently, new standards have been in place since 1 october. these are in line with international requirements and have resulted in a number of enhancements, including improvements to supervisory structures and codes of conduct. for these benchmark rates, too, the underlying transaction volume is currently very low. foreign exchange benchmarks i will now turn my attention to benchmarks on the foreign exchange market. on the international financial markets, currencies are traded around the clock. there are no final rates for any given day. given this situation, benchmarks on the foreign exchange market provide numerous investors, such as investment funds or asset managers, with a basis which they can use for uniform valuation of their portfolios. one of the best - known benchmarks is the wm / reuters fix, which is set daily at 4. 00 pm, london time ; it is calculated as the median of actual foreign exchange transactions conducted within the period of one minute. the fsb working group took on the task of investigating the way in which these benchmarks were fixed and recommending ways to improve them. the group ’ s work was independent of simultaneous investigations into foreign market manipulation by supervisory authorities in a number of different countries, which resulted in the imposition of fines in november. the final report presented at the end of september found that – unlike the situation for benchmark interest rates – liquidity in the foreign exchange market was high and therefore provided an adequate breadth of data for calculating benchmarks. however, the problem for benchmark fixing in this area stems from a different source, namely the fact that trading orders become heavily concentrated shortly ahead of the fixing time. this gives traders opportunities to manipulate the price of the fixing to their own advantage. in order to eliminate these opportunities, the working group is proposing that the fixing window be widened, thereby broadening the range of data sources. in addition, the group also recommends