jean - pierre danthine : market volatility, swiss national bank liquidity measures and foreign exchange reserves introductory remarks by mr jean - pierre danthine, member of the governing board of the swiss national bank, at the end - of - year media news conference, berne, 15 december 2011. * * * i would like to address three main issues today. these are the acute market volatility experienced this summer, the impact of the swiss national bank ’ s ( snb ) liquidity measures and minimum exchange rate upon our money and foreign exchange ( fx ) markets, and the management of our fx reserves. acute market volatility the second half of 2011 has, until now, been marked by an extraordinary degree of uncertainty. volatility on the equity, bond and foreign exchange markets has increased markedly, reflecting investors ’ concerns about the softening of global growth, the european sovereign debt crisis, the us debt ceiling crisis and the resilience of the international banking system. signs of this acute volatility abound. allow me to highlight three recent examples. firstly, between july and early august, the vix index, a measure of the volatility of the s & p 500, abruptly doubled. secondly, the msci world index, a measure of the state of global equity markets, decreased by almost 20 % between early july and late september, rebounding in october, only to fall again afterwards. as concerns about bank solvency and credit risk increased banks being at the heart of the crisis the benchmark msci world banks index also fell by over 25 % between early july and late september. thirdly, as concerns over the security of corporate and government bonds grew, the premia investors have had to pay against bond defaults have increased very significantly. the perceived decrease in the creditworthiness of key european companies and western european sovereign bonds was highlighted by the very sharp rise of several benchmark credit default swap ( cds ) indices for these markets. 1 the foreign exchange market has been of particular concern to the snb, as the swiss franc ’ s safe haven properties and the growing dearth of alternative “ safe ” assets led to massive movements in our currency, which required the snb to act. in early august, the real effective exchange rate of the swiss franc peaked at an estimated level of almost 40 % above its post - 1990 long - term average. 2 the extent of this deviation was very rare, in historic terms, as the

reserves, excluding swaps, increased from chf 50 billion in 2008 to over chf 225 billion by the end of september 2011. in order to promote further diversification, in 2010 the snb added four new currencies to its reserves, namely australian and singapore dollars, danish krone and swedish krona. as a result, in addition to euros and these four currencies, the snb ’ s portfolio is now composed of 26 % us dollars, 9 % japanese yen, 5 % pounds sterling and 4 % canadian dollars. central banks generally have large holdings of government bonds due to their need for liquidity. as is widely known, in recent months the ratings agencies have been reviewing or have downgraded the credit ratings of many sovereign bonds. despite this turn of events, approximately 96 % of all our investments in fixed - income assets are rated aaa or aa. in closing, i would like to emphasise that we are actively exploring and monitoring new asset classes and currencies in developed and developing markets. the aim of this process is to continually reduce concentration risks and to further diversify the snb ’ s fx reserves. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches