maxim in retail banking is that early engagement with distressed borrowers is a valuable tool for improving ultimate recoverability. in particular, emerging inability to pay instalments in full can induce a borrower to pay nothing at all, thereby risking a spiral into an unsustainable level of indebtedness. identifying pre - arrears situations and engaging with them and with early arrears cases can be very cost effective in arresting this spiral in the level of indebtedness arising from arrears. therefore, although what follows is about dealing with 90 - day plus arrears cases, efforts to address and stem the early cases should not be neglected. new legislation the new personal insolvency act offers new avenues of recourse for insolvent persons, including importantly the pia which could allow insolvent debtors to earn a “ fresh start ” through a period of being subject to what will likely be a relatively onerous payment plan, but without necessarily having to surrender an owner - occupied home. importantly, this avenue by construction is available only to insolvent borrowers, and therefore not to those who “ can pay ”. the terms of the legislation should help anchor some of the expectations of distressed borrowers and their lenders in arriving at bilateral solutions. given what international experience shows of how little is often recovered in net terms by creditors from payment plans, a well - designed loan modification bilaterally arranged between borrower and insolvent debtor can be better for both than the net outcome of a pia or bankruptcy. the different elements of the cure process there are several successive tasks for the lender in the typical mortgage arrears cure. it begins with the lender engaging with the borrower. the lender needs to assemble updated information in order to discover the customer ’ s current circumstances and how it has differed from the position at the original underwriting. then, taking account of current and prospective circumstances, if the contract is, or can be put on a sustainable basis, the lender needs to decide what revised schedule of payments ( if any ) should be offered. ( the attempt to cure a distressed mortgage may not always avoid repossession or voluntary surrender. ) and then the lender needs to ensure that the customer complies with the revised schedule. in the ccma, designed to provide appropriate and effective consumer protection measures and to ensure that borrowers are treated in a fair and transparent manner, the central bank bis central bankers ’

intervention was to keep the uncertainty with regard to the value of ubs ’ s illiquid assets from destabilising the bank and thereby our financial system and economy. when public funds are employed to restore financial stability, the rules governing the functioning of markets need to be adapted to ensure that such a situation can never arise again. we therefore strongly supported the sfbc ’ s stance in favour of a gradual strengthening of the big banks ’ capital levels, of capping their leverage ratios and reforming their compensation systems. in addition, the snb is currently working together with finma to impose more stringent liquidity requirements. as i already pointed out last year, a small country like ours is entitled to define specific conditions under which the systemic risks involved with having two large international banks domiciled on its territory must be limited. the federal council and the sfbc clearly recognised this situation and took appropriate preventive measures. for the future, it would also be advisable to examine the expediency of putting into place a legal framework and organisational measures that permit an orderly liquidation of systemically important banks. the crisis spreads to the real economy ultimately, it was inevitable that the financial market crisis would spread to the real economy. and yet the year 2008 began well. our country was in the midst of solid economic growth and was experiencing a strong inflow of foreign workers. in the first three quarters, year - onyear growth amounted to 2. 4 %, buttressed by all components of global demand except construction. at the end of summer, however, the situation turned completely. the faltering international credit markets and the mounting uncertainty caused global trade to plummet and prompted a decline in growth in our export markets ; indeed, most of our trading partners actually went into recession. in the fourth quarter of 2008, switzerland ’ s gdp receded to 1. 2 % and unemployment, which had reached a low - water mark of 2. 5 %, started to climb again. in our quarterly assessment of last december, we predicted a 0. 5 - 1 % drop in gdp for 2009. in march this year, based on the latest data available, we revised the forecast downwards to a 2. 5 - 3 % decline. the snb ’ s reaction in autumn 2008, as i said, we experienced an abrupt downturn of the economic cycle and, owing to plunging commodity prices, a spectacular change in the inflation outlook. whereas inflation had been at 3. 1 % in july