. however, due to its monetary policy mandate, the snb ’ s investment policy is subject to certain restrictions. it has to be designed in a way that helps the snb fulfil its mandate. to a certain degree, the function of our investment policy is to serve monetary policy. what does this mean exactly? objectives in applying its investment policy, the snb has two main objectives. the first is to ensure that its balance sheet can be used at any time for monetary policy purposes. investment policy may not restrict monetary policy in terms of either a possible expansion or a possible reduction of the balance sheet. the investment universe must be designed in such a way that we are able to purchase foreign currency and invest it quickly when necessary. but we must also be able to sell the investments again quickly if monetary policy requires it. the second objective of investment policy is to ensure that the currency reserves preserve their value over the long term. currency reserves serve to build confidence. they are used not just to overcome, but to also to prevent potential crises. currency reserves allow us to intervene in the market if the swiss franc weakens. moreover, irrespective of such extreme situations, we have to manage our currency reserves in the best interests of the country and thus make investments that retain their real value over the long term. implementation so, we pursue two objectives with our investment policy – ensuring the availability of the balance sheet for monetary policy purposes and preserving the value of our currency reserves. page 4 / 10 in order to achieve these two objectives, the snb ’ s investment policy is guided by a number of criteria. in addition, it has to meet two important requirements. let ’ s start with these requirements. first, we cannot hedge currency risks against the swiss franc. such hedging transactions would trigger additional demand for swiss francs, thereby increasing upward pressure on the currency. this would run counter to our current monetary policy, which is geared at reducing pressure on the swiss franc. second, in implementing our investment policy, we aim for minimal market impact. this is the fundamental distinction between investment policy and monetary policy. monetary policy measures are deliberately targeted to change market prices. they are intended to nudge monetary conditions in switzerland – interest rates or swiss franc exchange rates – in the desired direction. by contrast, the snb ’ s investment activity should not trigger any price changes. for this reason, when investing, we always take into account the absorption capacity of the markets. when

multifaceted and diverse. some countries rely heavily on a few large banks to provide credit and financial services ; our system, in contrast, includes financial institutions of all sizes, with a wide range of charters and missions. we also rely more than any other country on an array of specialized financial markets to allocate credit and help diversify risks. our system is complex, but i think that for the most part its variety is an important strength. we have many, many ways to connect borrowers and savers in the united states, and directing saving to the most productive channels is an essential prerequisite to a successful economy. that said, for the financial system to do its job well, it must be an impartial and efficient arbiter of credit flows. in a market economy, that result is best achieved through open competition on a level playing field, a framework that provides choices to consumers and borrowers and gives the most innovative and efficient firms the chance to succeed and grow. unfortunately, our financial system today falls substantially short of that competitive ideal. among the most serious and most insidious barriers to competition in financial services is the too - big - to - fail problem. like all of you, i remember well the frightening weeks in the fall of 2008, when the failure or near - failure of several large, complex, and interconnected firms shook the financial markets and our economy to their foundations. extraordinary efforts by the federal reserve, the treasury, the federal deposit insurance corporation ( fdic ), and other agencies, together with similar actions by our counterparts in other countries, narrowly averted a global financial collapse. even with those extraordinary actions, the economic costs of the crisis have been very severe ; but i have little doubt that, had the global financial system disintegrated, the effects on asset values, credit availability, and confidence would have resulted in a far deeper and longer - lasting economic contraction. it is unconscionable that the fate of the world economy should be so closely tied to the fortunes of a relatively small number of giant financial firms. if we achieve nothing else in the wake of the crisis, we must ensure that we never again face such a situation. the costs to all of us of having firms deemed too big to fail were stunningly evident during the days in which the financial system teetered near collapse. but the existence of too - big - tofail firms also imposes heavy costs on our financial system even in more pl