thomas jordan : snb monetary and investment policy and the impact of the strong swiss franc summary of a speech by mr thomas jordan, chairman of the governing board of the swiss national bank, at the volkswirtschaftliche gesellschaft des kantons bern, berne, 28 november 2012. * * * the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). as part of measures to combat the financial and economic crisis, balance sheets of central banks around the world have expanded substantially. in 2009 and 2010, the swiss national bank ( snb ) intervened in the foreign exchange market in order to combat an excessive appreciation of the swiss franc. on 6 september 2011, it set a minimum exchange rate of chf 1. 20 per euro, in order to avert major damage to the swiss economy. since then, the snb has enforced this minimum rate with determination and is prepared to buy foreign currency in unlimited quantities. this monetary policy is reflected in a very substantial expansion in its balance sheet. it has also altered the importance of the currency reserves and had an impact on the snb ’ s investment policy. in view of its mandate, monetary policy has priority at the snb. investment policy must be subordinated to the requirements of monetary policy. it is at the service of monetary policy and may not limit its room for manoeuvre. at present, enforcement of the minimum exchange rate has the greatest influence in the management of the currency reserves. the task is to diversify a large foreign currency portfolio according to the criteria of liquidity, security and return. even in these extreme circumstances, the snb ’ s investment policy and process have proved resilient. the investment skills we have developed over the past 15 years, together with our flexibility regarding investment categories allow for the smooth absorption even of large inflows from foreign exchange purchases. the principles upon which our investment policy is based have proved their worth. the idea of a sovereign wealth fund for better management of the snb ’ s currency reserves has attracted some public interest. however, a sovereign wealth fund would not facilitate monetary policy with regard to the enforcement of the minimum exchange rate. moreover, advocates of a sovereign wealth fund often have unrealistically high expectations, not least as regards returns. but the most important point is that the current size and composition of the central bank balance sheet are a direct reflection of monetary policy. the snb ’ s investment

thomas jordan : the swiss national bank ’ s monetary policy in turbulent times summary of a speech by mr thomas jordan, member of the governing board of the swiss national bank, at the geldmarkt - apero of the swiss national bank, zurich, 19 march 2009. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * the financial market crisis has now widened into a global economic recession, and the swiss economy is feeling the full impact. the snb has taken prompt and decisive action in response, and substantially relaxed its monetary policy. in mid - march, as a result of the sharp economic downturn since december 2008, a further major expansion of monetary policy became necessary. however, the snb was already operating a de facto zero interest rate policy ( zirp ), and the natural limits of conventional monetary policy had been reached. the snb therefore took three unconventional measures : increasing the number of transactions in repos with longer terms, purchasing swiss franc bonds issued by private sector borrowers, and buying foreign currency on the open market. in implementing these unconventional steps, the snb has demonstrated that, even in an environment of zero interest rates, it still has a number of tools at its disposal which allow it to react flexibly to any undesired tightening of monetary conditions. in this context, it is important not to misinterpret the foreign currency measures as the start of a “ beggar thy neighbour ” policy. in periods of zero interest rates, such purchases help to counter the risk of deflation. the swiss economy faces an exceptionally difficult year in 2009. economic activity is set to pick up again gradually over the course of 2010, thanks to the extremely expansive monetary policy. this is, however, conditional upon an economic recovery by our main trading partners, as well as a return to stability on financial markets. the snb measures are also aimed at reducing the risk of deflation in switzerland. despite the creation of massive amounts of liquidity, the snb remains committed to ensuring price stability in the future. we will use all means at our disposal to reduce liquidity again in good time, so as to prevent any upsurge of inflation in switzerland once the crisis has ended.