at the domestically focused banks has also decreased, but is still markedly higher than overall market growth. moreover, the affordability risk ( loan - to - income ratio ) in mortgage lending has continued to rise, interest rate risk remains at a historically high level, and interest rate margins have fallen even further, from a level which was already low. in these exceptional circumstances, banks should ensure that their resilience is high enough to be able to bear the risks taken, even in the event of a marked real estate price correction combined with an interest rate shock. the countercyclical capital buffer plays a significant role in this context by ensuring that banks hold additional capital as a buffer in the current situation. adding to that, many banks have a surplus of capital with respect to the regulatory requirements. such surplus capital is especially important under the current circumstances. banks should therefore maintain these surpluses in future, or should establish and increase them in line with their risk profile. as before, the snb will regularly assess whether the countercyclical capital buffer needs to be adjusted due to mortgage and real estate market developments. if the momentum in these markets picks up again, additional measures to limit the affordability risk in mortgage lending should be taken into consideration. bis central bankers ’ speeches

interest rate cut can be diluted. when confronted with such a risk, monetary authorities have to take rapid and decisive action in order to exert the desired influence on final demand. this is what we have done over the past few months. in order to monitor lending conditions since the outbreak of the financial crisis, the snb has been conducting regular surveys of the 20 major swiss banks. by providing us with information on these banks ’ intentions and expectations, the survey complements the analysis of lending volumes. in the vast majority of the institutions surveyed, no lending restrictions were announced in the third quarter. only 15 % of the banks reported that their lending practice had become slightly more restrictive. data for october on lending volumes in switzerland confirm this picture. mortgage lending is growing steadily, most recently at a rate of 3. 4 %. growth in other lending remains strong, albeit advancing at a slightly slower pace. large companies have increasingly drawn down their lines of credit, owing to difficulties in sourcing financing on the capital markets. all in all, there is, at present, no reason to speak of a credit crunch. however, this favourable situation could soon worsen, as has been observed in other countries. i will now conclude this second section with a few brief remarks on movements in monetary aggregates. having declined until recently, monetary aggregates are now rising slightly. following the interest rate cuts, we expect that growth in monetary aggregates will gather pace over the coming months. given the current heavy demand for liquidity, higher money growth does not, of itself, indicate an increase in inflation risks. only if money growth were to become excessive over a longer period would this pose a threat to price stability in the medium term. inflation outlook in addition to the rapid worsening of the global economy and the financial crisis, the third factor behind our policy of successive rate cuts since october is the radical change in the inflation outlook. inflation risks have largely dissipated since our last quarterly assessment on 18 september, leaving considerable room for manoeuvre in monetary policy, which we have firmly exploited. as you know, last december inflation breached the 2 % ceiling above which the snb considers that the conditions for price stability are no longer met. the rapid rise in inflation – indeed, at the beginning of 2007, we still had zero inflation – was due to the combined effect of a virtually unbroken rise in oil prices and the healthy state of the economy. in july this year, inflation reached 3. 1 %, a level