bonds, attention is given to broad diversification from issuer - specific risk. despite active management, therefore, the corporate bond portfolio cannot deviate from the market index to any considerable degree. 3. the new investment process : different functions largely separated the market and credit risks of individual transactions increase as the investment spectrum becomes broader. operational risks, including conflicts of interest and the problem of insider know - how, also gain in importance as asset management strategy becomes more active. we have therefore evaluated the investment process with a view to the requirements of good governance. important changes in this process include the following : investment and monetary policy decisions have been largely uncoupled, the definition and implementation of strategy have been segregated, controlling has been made an autonomous function, and the national bank ’ s bank council has been tasked with integral monitoring of the investment and risk processes. the governing board of the national bank decides on the medium - term investment strategy for the monetary reserves. taking into consideration the criteria of security and liquidity, an appropriate risk / return profile is targeted. in addition to the strategic allocation to the individual currencies and investment categories, the governing board defines the permissible range for implementation. department iii implements the strategy. within the defined bandwidths, an internal investment committee decides on positions which deviate from the strategy. in the risk controlling process, compliance with the strategy guidelines and the operative limits as well as the quality of the debtor categories are monitored. performance is also measured. with the expansion of the investment spectrum to include issuers with lower credit ratings, risk monitoring is gaining in importance. the governing board and the bank council ’ s risk committee are regularly informed about the results of the risk controlling process. the bank council ’ s risk committee assesses risk control and also oversees adherence to the principles of the investment process. 4. transparency : a further element of good governance the national bank has an accountability and information obligation not only to the bank authorities but also to the public. since the monetary reserves ultimately constitute national assets, this obligation also applies to the investment policy. the accountability obligation includes regular reporting on our investment activities. the national bank already provides information on the structure of its assets in its annual report, including details on currency allocation, holdings of individual investment categories, and on the major risk and return indicators. the investment policy guidelines of the swiss national bank, which have just been published for the first time, contain additional information on the investment and risk control process and on the investment universe.

##ening of the snb balance sheet would be riskless. this fiction flies against common sense and is mostly prevalent in academic circles. i will try and clarify some misunderstandings with respect to central bank balance sheets by stressing three important facts that apply both generally and to the current swiss monetary policy situation in particular. first, a central bank balance sheet is never a target per se, but rather, its size and composition simply mirror monetary policy decisions. second, massive balance sheet expansions carry financial and economic risks. 3 this is clearly the case when the policies underlying the balance sheet expansion comprise outright purchases of foreign exchange. this puts foreign exchange risk on the central bank ’ s balance sheet. third, policy measures involving a significant balance sheet expansion should be taken only as long as the benefits in terms of the broader policy objective clearly justify the risks and cover the costs associated with the balance sheet expansion. it is important to note that the costs and benefits of a given policy measure may change over time, and must therefore be reassessed repeatedly. a case in point is the snb ’ s decision to introduce the minimum exchange rate of chf 1. 20 per euro in september 2011, and then discontinue it earlier this year. as mentioned, in enforcing the minimum exchange rate, the snb intervened heavily in the foreign exchange markets, and did not refrain from taking on significant balance sheet risks, particularly in 2012. at the time, interventions were necessary to counteract upward pressure on the swiss franc resulting from substantial capital inflows and a lack of outflows due to flare - ups in the european debt crisis. towards the end of 2014, the minimum exchange rate again came under increasing market pressure, requiring renewed interventions by the snb. this time, however, the international environment was very different. while expectations of an interest rate rise in the united states were mounting and the dollar was appreciating, from mid - year onwards there were signs in the euro area of further monetary policy easing, and the euro started to weaken across the board, pushing the eur / chf exchange rate close to the chf 1. 20 per euro floor. on the back of these developments – also reflecting the collapsing interest rate differential – swiss franc investments again became relatively more attractive. given these circumstances, and in view of quantitative easing in the euro area, the continuation of the minimum exchange rate policy would have meant a permanent, potentially uncontrollable expansion of the snb balance