on the bank. depending on the size of the open position vis - a - vis the hli, this might threaten the bank's solvency in an extreme case. the effective risk emanating from hlis depends primarily on the margin and collateral requirements set by the banks. these requirements help not only to constrain losses but also to determine the amount of leverage hlis are allowed to use. moreover, banks can partially hedge their risk and diversify their exposures. in general, we do not see a substantial difference between banks ’ exposures to hlis and other risky exposures, such as, for instance, derivatives. both make high demands on banks ’ risk management and their value may react sharply to market movements because of leverage. investments in hlis are thus comparable to other risky investments. let us now have a look at the collapse of ltcm – by far the largest hedge fund to date – in order to obtain some idea of the potential disruptive capacity of hlis. almost all of the fund's capital was destroyed in the collapse. losses amounted to usd 4. 4 billion, of which usd 1. 9 billion were incurred by the manager of the hedge fund, usd 0. 7 billion by ubs and usd 1. 8 billion by other investors. moreover, if the federal reserve bank of new york had not intervened to organise a bailout, the hedge fund's counterparties would have incurred estimated losses of about usd 5 billion. 7 although these amounts seem high, they are in fact modest in relation to the involved banks'capital and to the size of the financial markets. second transmission channel : banks as price takers on financial markets hlis act as buyers and sellers on the financial markets. their actions have an impact on prices, liquidity and volatility in just the same way as any other market participant's action. however, there are two reasons why the impact of hli trading could be stronger. first, in certain market segments they have an above - average share in trading volume. second, margin calls can force hlis with a high leverage and a focus on derivatives to liquidate large positions in a very short period of time. in stressful market conditions, both of these phenomena could further depress market prices, reduce market liquidity and increase volatility. this is the second transmission channel through which hlis may amplify shocks and spread negative effects in the banking sector. see also hildebrand, 2007.

, efficient authorities, and a solid and secure infrastructure. this constitutes a strong underpinning for financial service providers. but let us not rest on our laurels. we must try to avoid creating any administrative hurdles that neither contribute to stability nor bring any great benefit, but instead unnecessarily restrict the activities of financial service providers. transfer stamp tax and withholding tax, for instance, curb the potential for growth in switzerland. the reform of the withholding tax system and the abolition of transfer stamp tax on domestic bonds are expected to strengthen the swiss capital market. 2 this would not only benefit the financial sector, but also improve the financing options available to companies. it would also benefit small and medium - sized enterprises, for which such opportunities have been very limited until now. cf. roadmap for financial market policy switzerland 2020 +, advisory board for future of swiss financial centre, 2019. page 4 / 5 open market access switzerland undoubtedly owes much of the prosperity it enjoys today to open markets and thriving trade. however, for the export - oriented parts of the swiss financial industry, limited market access continues to be an obstacle restricting growth potential. market access to some countries has deteriorated since the financial crisis. this especially affects wealth managers who are operating in our relatively small domestic market. measures to facilitate market entry would therefore be helpful. and there are new opportunities to be developed in the multilateral trading system too. until now, the liberalisation of global trade has focused on goods. liberalisation of trade in services could offer new growth potential for financial service providers. closing remarks i come now to the end of my speech. ladies and gentlemen, good framework conditions are key to ensuring that our financial centre remains a global leader. they must be safeguarded at all times, and, where appropriate, improved. in addition, and speaking more generally, good framework conditions help companies in all sectors find corporate responses to challenges such as coronavirus, but also to structural changes. they provide the foundation for private market participants to be economically successful and compete at an international level. this is, of course, especially true of the financial sector. thank you for your attention. page 5 / 5