of events alarmed investors. risk premiums subsequently increased, with uncertainty as to the extent of the losses incurred by banks triggering a general crisis of confidence among financial market participants. liquidity on the major monetary markets became scarce and there was a return to volatility on the stock markets. repercussions for switzerland switzerland quickly felt the storm due to the exposure of its financial sector. first, our two big banks saw their profitability fall sharply in the second half of 2007. losses made in connection with their investment activities in the united states were a decisive factor in this respect. one of the big banks even required fresh injections of capital, such was the extent of the losses it suffered. the private banking sector and domestic banking activities continued to flourish, however. second, the turbulent environment handicapped the money market and led to a widening of the spread, i. e. by means of an unwelcome interest rate hike. the snb responded immediately by relaxing its lending conditions for banks. contrary to certain suggestions, this measure was not intended as a means of increasing the amount of liquidity in circulation on a permanent basis. after all, inflationary pressure would potentially rise given such a scenario. instead, we acted in a flexible way and adjusted our maturities in accordance with the demands in the lending market so as to provide this market with the buffer it needed. we have consequently introduced three - month loans, whereas the terms we offered previously were never longer than 30 days. we also took joint action with other central banks and provided us dollar liquidity to our counterparties – the first time we have ever taken such a step. the gradual tightening of lending conditions within our domestic market is a third factor, albeit one which is still to fully materialise. indeed, the fear that the liquidity requirements of the two big banks may be having a detrimental impact on credit volumes in switzerland cannot be excluded. however, the rest of the swiss banking sector – which accounts for almost two - thirds of switzerland ’ s domestic credit supply – posted excellent results in 2007, thereby helping to limit the burden of risk. furthermore, our figures show that there has so far been no impact on lending growth. nevertheless, a gradual revision of banks ’ credit risk evaluations appears the likely scenario, simply given the economic uncertainty of recent months. banks may consequently raise their interest rates for commercial loans or ask their customers to provide additional collateral. the sharp increase in premiums seen on the bond market in recent months would seem

thomas jordan : the rationale for discontinuing the minimum exchange rate and lowering interest rates introductory remarks by mr thomas jordan, chairman of the governing board of the swiss national bank, at the press conference of the swiss national bank, zurich, 15 january 2015. * * * ladies and gentlemen thank you for once again accepting our invitation to this press conference at such short notice. let me begin by explaining the rationale for discontinuing the minimum exchange rate and lowering interest rates. afterwards, i shall be happy to answer your questions. discontinuation of the minimum exchange rate the swiss national bank ( snb ) has decided to discontinue the minimum exchange rate of chf 1. 20 per euro with immediate effect and to cease foreign currency purchases associated with enforcing it. the minimum exchange rate was introduced during a period of exceptional overvaluation of the swiss franc and an extremely high level of uncertainty on the financial markets. this exceptional and temporary measure protected the swiss economy from serious harm. while the swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate. the economy was able to take advantage of this phase to adjust to the new situation. recently, divergences between the monetary policies of the major currency areas have increased significantly – a trend that is likely to become even more pronounced. the euro has depreciated substantially against the us dollar and this, in turn, has caused the swiss franc to weaken against the us dollar. in these circumstances, the snb has concluded that enforcing and maintaining the minimum exchange rate for the swiss franc against the euro is no longer justified. interest rate lowered at the same time as discontinuing the minimum exchange rate, the snb will be lowering the interest rate for balances held on sight deposit accounts to – 0. 75 % from 22 january. the exemption thresholds remain unchanged. further lowering the interest rate makes swissfranc investments considerably less attractive and will mitigate the effects of the decision to discontinue the minimum exchange rate. the target range for the three - month libor is being lowered by 0. 5 percentage points to between – 1. 25 % and – 0. 25 %. outlook for inflation and the economy the inflation outlook for switzerland is low. in december we presented a conditional inflation forecast, which predicts inflation of – 0. 1 % for this year. since this forecast was published, the oil price has