. domestic non - financial corporations have exploited the low capital market interest rates and issued more bonds since the introduction of the negative interest rate. as a preliminary conclusion, we may state that the negative interest rate in switzerland principally operates via the exchange rate channel. together with our willingness to intervene in the foreign exchange markets, it has helped to ensure that the swiss franc has not strengthened further despite heightened uncertainty, for example in the wake of the british eu referendum. moreover, yields on government and corporate bonds have declined since the negative interest rate was introduced, as did mortgage rates, albeit to a lesser extent. overall, financing costs for households and businesses are lower today than they were before the introduction of negative interest. along with the rise in the volume of bonds issued, this is evidence that negative interest is also having some impact via the credit channel, even though growth in bank lending has not risen as would normally be expected. on 18 december 2014, the snb decided to charge interest of – 0. 25 % on sight deposits held by banks and other financial market participants at the snb. with the discontinuation of the minimum exchange rate, the interest charge was lowered further to – 0. 75 %. page 6 / 16 challenges posed by low interest rates in switzerland, therefore, negative interest rates have had the desired effect. yet low interest rates also present a number of challenges and potential side - effects, which i would like to look at now. one challenge is communication. at first glance, imposing a charge on deposits appears to turn the logic and laws of economics on their head. it seems unnatural to pay interest on deposits. consequently, clear communication of monetary policy is especially important right now. in the earlier part of my presentation, i demonstrated that negative interest rates in switzerland are the result of a decline in the equilibrium interest rate and the snb ’ s expansionary monetary policy – a policy rendered necessary by global conditions. negative interest also puts a strain directly on banks, and indirectly on pension funds and life insurance companies, which worry about their profitability and about meeting their obligations. as i have mentioned, the snb takes these concerns very seriously. yet the challenges now facing pension funds are not caused first and foremost by monetary policy. rather, their problems stem from the fact that pension funds have to achieve returns that are nominally fixed and were set when the equilibrium interest rate was higher. for banks, the negative interest rate undoubtedly represents a cost because they have to pay interest on their deposits at

savings deposits at banks, coupled with concerns over future pension payments, could induce households to save more in order to achieve a specific savings goal. as a result, consumption falls instead of rising, as one might normally expect in an environment of low interest rates. at the same time, the increase in savings causes the interest rate level to decline further. this effect is reinforced if households assume an increasingly long phase of low interest rates. despite these monetary policy challenges and potential side - effects, in switzerland the negative interest rate is currently indispensable, owing to the overvaluation of the swiss franc and the globally low level of interest rates. nonetheless, the challenges and side - effects show clearly that we must aim for a normalisation of monetary policy over time. the question is, how can such a normalisation be effected? current monetary policy in an international context to answer this question, i would like to place current monetary policy in an international context. in addition to the snb, virtually all major central banks are currently pursuing a monetary policy of low or negative interest rates. by dint of bold and decisive policies, central banks have managed to prevent the global financial crisis from turning into a second great depression. yet, despite highly expansionary monetary policies around the world, many large advanced economies have not recovered as strongly as hoped. in switzerland, the recovery has been relatively robust by international standards. yet inflation in our country, as in many other countries, is still lower than we would like. so the past few years have shown clearly that an expansionary monetary policy is not a panacea for catalysing growth in the major advanced economies. expansionary monetary policy is no substitute for necessary structural measures and it must not delay them. monetary policy influences the economy ’ s growth potential only insofar as price stability reduces uncertainty. beyond this, it has no effect on economic growth in the longer term. for this reason, longer - term growth prospects can only be improved through structural measures. for instance, the promotion of education, research and development can increase productivity growth. good economic conditions support growth : if entrenched labour market structures are dismantled, competition is encouraged, and contracts are reliably enforced, the economy page 8 / 16 becomes more efficient. a pension system that is sustainable in the long term can allay people ’ s fears about an uncertain income in their old age, and thereby avoid an excessive propensity to save. if such reforms in the major world economies