simple measure of real estate valuation, lies above its long - term average in many countries. 12 this has been accompanied by higher mortgage lending and, in some countries, by an increase in lending risks. 13 overall, these developments have made real estate and mortgage markets more vulnerable to shocks, such as a sudden increase in interest rates or a deterioration in economic prospects. there are several reasons behind this marked increase in real estate prices. they include tight housing supply, a probable increase in housing demand due to the pandemic itself, and the historically low interest rates that have prevailed in recent years. in particular, low interest rates push up housing demand but also incentivise risk - taking behaviour by banks, by reducing the cost of leverage and weighing on bank margins and profitability. a global normalisation of monetary policy rates seems to be underway, most notably in the uk and in the us, against the background of a sharp rise in inflation. this could help slow down the increase in vulnerabilities, if the normalisation takes place gradually and does not trigger an excessive tightening of financial conditions. however, the global level of interest rates is likely to remain low in the medium term, dampened by structural factors such as demographics, inequality and a strong demand for safe assets internationally. monetary policy has no influence over these factors. even more importantly, the focus of monetary policy is price stability and economic developments, and not curbing financial system vulnerabilities. the most suitable way to address these vulnerabilities is therefore through macroprudential policy. many authorities have in fact already responded to these developments by tightening macroprudential policy. some countries have tightened borrower - based instruments in an attempt to curb rising vulnerabilities ( e. g. finland, france and iceland ). others have opted to increase banking sector resilience to ensure that banks have enough capital to withstand a correction. jurisdictions that released or reduced the ccyb in the acute phase of the pandemic to support bank lending are reactivating or increasing it again, in some cases to a higher level ( e. g. denmark, germany, iceland, norway, sweden, uk ). in switzerland too, vulnerabilities in the residential real estate and mortgage markets have increased since the onset of the pandemic. first of all, numerous indicators point towards increasing overvaluations in the residential real estate market. slide 3 shows, for apartment prices, the simple price - to -

speech embargo 29 march 2022, 6. 30 pm macroprudential policy beyond the pandemic : taking stock and looking ahead international center for monetary and banking studies fritz zurbrugg vice chairman of the governing board * swiss national bank geneva, 29 march 2022 ∗ the speaker would like to thank angela abbate for her support in preparing this speech. he also thanks toni beutler, robert bichsel, maja ganarin, jacqueline thomet and martin straub, as well as the snb language services. dear professor panizza, ladies and gentleman thank you, professor panizza, for inviting me to participate in the public lecture series organised by the international center for monetary and banking studies ( icmb ) in geneva. it is a pleasure to be here again, particularly since this is the first lecture after a two - year pandemic - related break. while the effects of the pandemic appear to have subsided, we are currently experiencing another tragic development. i am deeply troubled by russia ’ s war on ukraine and want to express my heartfelt sympathy to the ukrainian people. in my remarks this evening, i will be talking about macroprudential policy and rising challenges to financial stability, two topics that remain very relevant today. in recent months, policymakers in switzerland and abroad have left the phase of accommodative macroprudential policy behind. many jurisdictions have rolled back the easing of bank capital requirements that took place during the pandemic. furthermore, several countries have actually taken steps to tighten macroprudential policy. what is behind this shift? the simple answer is : the economy is in a very different place today than when the pandemic started about two years ago. back then, the shock to the global economy was unprecedented, and the uncertainty about its economic ramifications was enormous. governments and central banks responded to this shock with an unparalleled amount of fiscal and monetary stimulus. this policy support, together with vaccine rollout, was instrumental in setting the global economy on the path to recovery. looking back from a financial stability perspective, banks ’ ability to fulfil their role as credit providers to the real economy without interruption was an additional factor that contributed to the recovery. this was mainly possible thanks to substantial capital buffers built up since the global financial crisis ( gfc ), which increased banking sector resilience, and to policy support, which helped borrowers bridge their