news conference berne, 15 june 2017 andrea m. maechler introductory remarks by andrea m. maechler i will begin by reviewing the situation on the international financial markets. i will then address some developments on the swiss money and foreign exchange markets – specifically the establishment of saron as the leading reference rate for interest rate derivatives and the adoption of a global code of conduct for foreign exchange market transactions. situation on the financial markets let me start with developments on the international financial markets. overall, positive sentiment has continued to prevail since the beginning of the year. economic conditions have provided favourable momentum, with data pointing to ongoing recovery in both europe and the us. furthermore, companies on both sides of the atlantic reported solid profits in the first quarter. the principal beneficiaries of these developments have been the equity markets, both in the advanced and the emerging economies ( cf. chart 1 ). various major equity indices have repeatedly recorded historical highs in the year - to - date period. while the smi has not yet hit its historical high, it too made substantial gains and recently closed up 8 % on the beginning of the year. heightened political uncertainty has had no lasting effects on the equity markets. this assertion is borne out in risk perception metrics. volatility derived from option prices ( implied volatility ) once again fell substantially. on the us equity market, volatility approached historical lows at times in may and june ( cf. chart 2 ). heightened political uncertainty has, however, occasionally left its mark on the bond and foreign exchange markets. for instance, demand for highly rated government bonds has remained strong since the start of the year. in addition, despite largely positive economic data, the inflation outlook for the major advanced economies is still muted. as a result, yields on highly rated government bonds have changed only marginally since the beginning of 2017 page 1 / 5 berne, 15 june 2017 andrea m. maechler news conference and have remained low ( cf. chart 3 ). in switzerland, too, the yield on ten - year confederation bonds has remained essentially unchanged. on the foreign exchange market, the swiss franc experienced repeated episodes of upward pressure as a result of heightened political uncertainty in europe. the elections in the netherlands and france, as well as the uk ’ s upcoming brexit negotiations with the eu, generated increased demand for currencies considered particularly safe by investors. after the presidential election in france, the euro strengthened and pressure on the

the swiss franc. this led to a significant expansion of our balance sheet. how would we have proceeded in a sovereign money system? we would probably not have reacted so decisively given the difficulty of reducing liquidity once it has been created in a sovereign money system, which can therefore lead to higher inflation further down the line. a weaker monetary policy reaction would have exacerbated the negative consequences of the crisis for the real economy. quite apart from that, it is doubtful whether we would even have been able, in a sovereign money system, to react as we did because the initiative limits the number of tools we would as regards the snb ’ s shift from monetary targeting to interest rate targeting, cf. meyer, hans, on monetary policy in the new year, speech held at the university of st. gallen, st. gallen, 20 january 2000. page 6 / 8 have available. interventions in the foreign exchange market, which have played a central role in combating the overvaluation of the swiss franc, would not actually be allowed under a sovereign money system. when we intervene in the foreign exchange market, we exchange new swiss francs for foreign currency instead of giving them away. the creation of money in the context of foreign exchange market interventions is thus not ‘ debt - free ’. economic order another problem is that the swiss sovereign money initiative is etatist and imposes an unnecessary burden of responsibility on the snb and disempowers the private sector. this does not fit in with the swiss concept of the state and runs counter to proven principles of economic order. in order to achieve its aims, the initiative also does not shy away from providing for the possibility of general restrictions in economic freedom. this is clearly set out in the second sentence of the proposed article in the constitution. adoption of the initiative would impose additional tasks on the snb. the snb today has the clear and appropriate mandate to ensure price stability and has a large degree of flexibility in fulfilling it. under the sovereign money system, the snb would have to assume tasks which far exceed this mandate. the initiative imposes two additional tasks on the snb : first, making ‘ debt - free ’ payments and, second, guaranteeing the supply of credit to the swiss economy. the latter is problematic because it could lead to a conflict of interest between price stability and credit supply. above all though, it means that the snb would have to decide precisely who should receive the loans. yet