. thus, after liquidity and security, the criterion of return is also taken into consideration. in order to improve the long - term risk / return profile, certain interest rate, equity, credit and liquidity risks are intentionally entered into, based on the associated risk bis central bankers ’ speeches premia. these risks are spread as widely as possible by diversifying the investments. for instance, government bonds in the main currencies are supplemented by additional asset classes including corporate bonds and equities. in particular, the share of equities, which currently amounts to 18 %, increases the expected return in our portfolio. challenges when investing high foreign exchange reserves the snb is one of the world ’ s major investors. at the end of 2015, our foreign exchange reserves amounted to around chf 560 billion. the management of large foreign currency investments comes with its own set of challenges. i would like to focus on three of these challenges in particular, and explain briefly how we address them : first, the widening of fluctuations in absolute investment returns ; second, non - financial aspects, which have become much more important in our globally diversified equity portfolio ; and third, liquidity conditions, which have deteriorated in some markets. the size of the snb ’ s foreign exchange reserves means that investment returns, in absolute terms, can fluctuate sharply from year to year. this has been particularly evident in recent years : in 2015, the snb reported an annual loss of over chf 23 billion. in 2014, it had recorded a profit of more than chf 38 billion. a look at the breakdown of investment performance shows clearly that the volatility in our investment returns is mainly the result of exchange rate fluctuations. this is illustrated by slide 6. the red bars show that, when converted to domestic currency, investment returns have always been positive over the last 15 years. by contrast, the foreign currency contribution – which is denoted by the blue bars – has mostly been negative. in individual years, the strong appreciation of the swiss franc has even led to the total return in swiss francs being negative. this is denoted in the chart by the yellow triangles. slide 7 shows that, over the last 35 years, currency risk has accounted for more than 80 % of the total risk in our portfolio. we cannot hedge against currency risk, since this would increase the upward pressure on the swiss franc. hedging would thus undermine our monetary policy objectives. we must accept currency risk as an inherent component

philipp hildebrand : principles for sound compensation practices summary of a speech by mr philipp hildebrand, vice - chairman of the governing board of the swiss national bank, at the economic outlook 2009 ( unternehmer nw - schweiz ), basel, 23 april 2009. the complete speech can be found in german on the swiss national banka€™s website ( www. snb. ch ). * * * most financial institutions viewed compensation systems as being largely unrelated to risk management and risk governance prior to the crisis. short - term profits were rewarded with generous bonuses with little regard to the longer - term risks taken on behalf of the firm to generate those profits. with hindsight, it should therefore be no surprise that these bonuses fueled the excessive risk - taking that has ultimately undermined the global financial system. it is important for the future stability of our financial system that compensation systems be viewed as an integral part of the risk management system in financial firms, and designed and governed with this in mind. the financial stability board ( previously the financial stability forum ) has drafted a set of sound compensation principles for large financial institutions with exactly this goal in mind. the principles were endorsed by the g20 leaders at the london summit earlier this month and aim to be widely implemented by the 2009 remuneration round.