of money held by households and companies, remained strong. this growth in money was accompanied by robust lending on the part of banks. although the rate of growth of mortgage loans to households has declined since mid - 2012, it is still at a high level. most recently, mortgage lending to companies, in particular in residential construction, has increased significantly. overall, lending has been growing faster than nominal gdp for several years. in addition, prices for owner - occupied apartments and single - family homes have risen strongly in the past few years. given the sustained period of exceptionally low interest rates, there is a risk that the imbalances on the mortgage and real estate markets will increase further. this development jeopardises financial stability and, in the event of an abrupt correction, can have wide - reaching consequences for the real economy. snb monetary policy ladies and gentlemen, the snb continues to face major challenges. in particular, the threat that the swiss franc could suddenly come under upward pressure again has not been averted. in the current low interest rate environment, therefore, the minimum exchange rate remains the focal instrument for ensuring appropriate monetary conditions. the financial crisis has shown that for balanced economic development more than just price stability is required ; financial stability must also be guaranteed. in switzerland, the fact that the snb is required to contribute to ensuring financial stability was already laid down in the national bank act of 2004. our annual financial stability report is an important instrument in this respect. it draws attention to emerging imbalances and the existence of risks which, in our view, could jeopardise the stability of the banking industry as a whole in the medium term. in addition, last year a new instrument was created – the countercyclical capital buffer – based on the lessons drawn from the financial crisis. at the beginning of the year, the snb proposed that this buffer be activated, and the federal council decided in favour of an activation in february. the countercyclical capital buffer will come into effect from the end of september 2013 and will strengthen the resilience of the banking industry. moreover, it will help to counter a further build - up of imbalances on the mortgage and real estate markets. my colleague, jean - pierre danthine, will now give you our assessment of the risks in the financial sector. bis central bankers ’ speeches

came much later only recently – was when donald kohn, former vice chairman of the us federal reserve apologized by saying, “ the cops were not on the beat, resulting in the worst economic recession and loss of millions of jobs ”! at the end of the day, the problem is not not knowing the problem, but knowing it and dithering, agonizing over choices, temporizing, procrastinating and doing nothing credible, timely, tangible and decisive about it. in other words, in my considered opinion, we don ’ t really have to rethink capitalism and globalisation, for paraphrasing john ruskin, what finally matters is not knowing what must be done but actually doing what must be done and doing it when it must be done!! 2. the cataclysmic financial crisis has thrown into sharp relief, as never before, the critical and important role of “ asset price ” inflation / asset bubbles also, as opposed to that of shop floor / products / services inflation alone, as a key variable, in monetary policy response. for what happened was unprecedented in that with monetary policy focused only on traditional cpi, interest rates were kept low in spite of exploding prices of assets like real estate / property, credit assets, equity and commodities. and this was all made possible because of the huge pre - crisis current account surpluses in china and other emerging market economies ( emes ), and huge private capital inflows into emes in excess of their current account deficits, getting recycled back as official capital flows into government bonds of reserve currency countries, especially the usa, resulting in compression of long term yields which, in turn, translated into lower long term interest rates even for the riskier asset classes mentioned above. this chasing of yield, due to global savings glut, in turn, led to a veritable credit bubble, characterized by unprecedented underpricing of risk as reflected in the all - time - low risk premia with junk bonds spreads becoming indistinguishable from bis central bankers ’ speeches investment grade debt! such a low interest rate environment coupled with luxuriant supply of liquidity, created enabling environment for excessive leverage and risk taking. this financial syndrome was a classical case of “ too much ” and “ too little ” – too much liquidity, too much leverage, too much complex financial engineering, too little return for risk, too little understanding of risks ”. this syndrome of too much of arc