supply of liquidity has reduced swiss franc interbank rates. as can be seen in chart 2, risk premia on the swiss franc interbank market have also declined. they fell by more than a half in may while, during the same period, us dollar risk premia on the interbank market in the us rose again. alongside the uncertainty, investor risk aversion has grown over the last few months. as a result, there has been a movement of capital in the direction of investments that are considered to be more secure ( flight to quality ). this is reflected, for example, in a rise in the gold price since february 2010. in may 2010, the gold price in swiss francs reached new heights. the flight to quality has also had consequences for switzerland, since our country has traditionally been regarded as a safe haven for investors. this situation has been reinforced by the fact that, until now, the swiss economy has withstood the crisis better than most developed countries. this has resulted in upward pressure on the swiss franc, which has led to repeated interventions on the foreign exchange market. the liquidity injected into the market in the course of these interventions has reduced swiss franc interest rates, in particular for short term maturities. in addition, the yield on 10 - year swiss confederation bonds fell to below 1. 50 % in may 2010. for the sake of completeness, it should be pointed out that the swiss franc has not been the only currency to appreciate. the yen, the us dollar and the currencies of the nordic countries have also strengthened against the euro. investing foreign exchange reserves as already mentioned by philipp hildebrand, the snb had to implement unconventional monetary policies in order to combat the financial crisis and avert deflation risks. this resulted in an expansion in the snb balance sheet, which took place in two stages. in the first stage, during the crisis, the snb made use of eur / chf swaps, while in the second stage, when it was confronted with the appreciation of the swiss franc, it intervened on the foreign exchange market. as part of these unconventional measures, the snb purchased swiss franc bonds issued by private sector swiss borrowers and temporarily extended the terms of its repo operations. today i am going to focus on the impact that the snb ’ s interventions have on its balance sheet. in these interventions, the snb purchased euros as well as, to a lesser extent

thomas jordan : prospects for the swiss economy in 2009 summary of a speech by mr thomas jordan, member of the governing board of the swiss national bank, at the erfa - gruppe, weinfelden, 15 january 2009. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * following a long, strong and broad - based growth phase, the world economy moved into a major recession in mid - 2008. about a year after the beginning of the unprecedented financial market crisis, there was a radical turnaround in the global economic outlook. the european and asian economies were not disconnected from the us, as had been hoped. the swiss economy leans heavily on its export and financial sectors and faces a difficult year. a recession appears unavoidable in 2009. consequently, the skilful deployment of monetary and fiscal policies as well as optimal conduct on the part of business practitioners in switzerland are particularly important. monetary policy can be changed quickly and its impact is relatively rapid through its influence on interest rates and the exchange rate. the snb has reacted resolutely to the deterioration in the economic situation and has reduced interest rates to almost zero. if necessary, monetary policy can be rendered even more expansionary through a series of alternative instruments. in the case of fiscal policy, the focus is on effective automatic stabilisers – first and foremost, allowing the occurrence of temporary budget deficits, together with unemployment benefits and compensation for short - time working. in view of the extent and risks of the current crisis, fiscal policy will need to consider and prepare the deployment of additional stabilisation measures alongside the automatic stabilisers. in addition to the increased focus on economic policy, business practitioners within the swiss economy are also challenged. in the case of banks, it is essential that credit shortages for companies and private households be avoided. moreover, interbank business needs to be strengthened in order to smooth out liquidity imbalances. companies must enhance their innovativeness and use opportunities for opening up new markets. the swiss economy has many structural strengths and this prompts confidence that switzerland will overcome the crisis.