lending? stephen cecchetti sums it up as follows : “ debt is a two - edged sword. used wisely and in moderation, it clearly improves welfare. but, when it is used imprudently and in excess, the result can be disaster ” ( cf. slide 27 ). 27 i myself have compared lending not with a double - edged sword, but with food. a balanced diet is essential for survival. excessive and unhealthy eating, however, can become a problem. judicious borrowing and lending is an essential foundation of a flourishing economy. excesses on the credit market, by contrast, can lead to crises and, as a result, cause extensive damage to the economy as a whole. it is therefore important that banks, households and companies always exercise sufficient caution and restraint at the ‘ credit buffet ’. equally, it is just as important that the snb carefully analyses developments on the credit market and makes optimal use of the tools at its disposal in order to mitigate any risks to financial stability as far as possible. the overall subdued economic growth in switzerland over the last two years and lower net immigration are also explanations for the recent restrained momentum on the credit and real estate markets. cecchetti et al. ( 2011 ). the international monetary fund ( imf ) came to a similar conclusion regarding household debt in its latest financial stability report : household borrowing promotes growth in the short term. in the medium term, however, too high a level of household debt reduces economic growth ( imf, 2017 ). page 14 / 16 bibliography assenmacher - wesche, k. and s. gerlach ( 2008 ), financial structure and the impact of monetary policy on asset prices, snb working papers, 2008 – 16, september. bcbs ( 2010 ), basel iii : a global regulatory framework for more resilient banks and banking systems, bank for international settlements, december. bean, c. et al. ( 2010 ), monetary policy after the fall, presented at the federal reserve bank of kansas city ’ s symposium on macroeconomic challenges : the decade ahead, jackson hole, wyoming, 26 – 28 august. beck, t. ( 2011 ), the role of finance in economic development : benefits, risks, and politics, center discussion paper, 2011 – 141. boissay, f. et al. ( 2016 ), booms and banking crises, bis working papers, 545, february. buttiglione

list of collateral eligible for snb repos ( snb gc basket ). the overnight - equivalent of an interest rate represents the residual part of the interest rate after adjusting for the term structure of the interest rate curve. the traditional poole ( 1968 ) model analyses the reserve demand curve in an environment where monetary policy is implemented without applying reserve tiering. page 6 / 10 indicated, the two distinct interest rates applied to reserves provide incentives for banks to trade their reserves. a money market rate that is compatible with the incentives of both borrowers and lenders must lie between these two interest rates. as shown on this slide, the demand curve is thus capped in the upper left segment by the upper remuneration rate and it is bounded in the lower right segment by the lower remuneration rate. accordingly, saron will lie in the corridor between 0 % and 0. 5 %. with the transition to a positive policy rate, we no longer want saron to be in the lower or middle part of the corridor. we want it to be close to the upper bound of the corridor, at 0. 5 %. this is because, in introducing our new approach to implementing monetary policy, we placed our policy rate at the upper bound of the corridor instead of keeping it at the lower bound as we had done in the negative policy rate environment. if the snb were not to absorb reserves, the stock of excess reserves would still be sizeable. because of the large supply of reserves in the interbank money market, saron would be close to the lower bound of the corridor at around 0 %, as shown on the slide. in order to steer saron close to the upper bound of the interest rate corridor and thereby towards the snb policy rate, we perform reserve - absorbing operations that reduce the stock of excess reserves and ultimately lower the supply of reserves in the interbank market. as shown on slide 10, if the scale of the reserve - absorbing operations is large enough, the new money market equilibrium will be characterised both by a lower supply of reserves and, as desired, by saron being close to the snb policy rate. the interest rate in the auctions for our term repos and snb bills is near the policy rate on an overnight - equivalent basis. these operations establish a ‘ soft floor ’ on the interest rates used in transactions in the overnight repo market. this is depicted by the green line on the slide just below saron, which is indicated by the