fritz zurbrugg : financial markets, the management of swiss currency reserves and interest rate benchmark reforms introductory remarks by mr fritz zurbrugg, member of the governing board of the swiss national bank, at the media news conference of the swiss national bank, berne, 12 december 2013. * * * i will begin today by looking at the situation on the financial markets. then i will talk briefly about developments in our foreign exchange holdings. i will close with a few comments on the progress that has been made in reforming interest rate benchmarks at both international and national level. situation on financial markets since our last media news conference in june, the positive risk sentiment on financial markets has been largely maintained, as is evident from the soaring share prices, among other things. in the past few weeks, the key us indices dow jones and s & p 500 have reached new record levels, thereby exceeding the peaks attained prior to the global financial crisis. in addition, japan ’ s nikkei index and the most important western european stock exchange indices, including the swiss smi, have again recorded significant gains in recent months. despite all the euphoria on the stock exchanges, we must not forget that it is not only the improvement in the economic outlook but also the continuation of the very expansionary monetary policy around the world which is behind this positive risk sentiment. in may and june we saw what could happen if expectations of a less expansionary monetary policy course become widespread in the market. at that time, the announcement by the us federal reserve of a possible reduction in its bond purchase programme caused share markets to plunge temporarily. the wave of selling did not recede until the beginning of july, when the federal reserve, the european central bank and the bank of england reassured markets that key rates would remain at very low levels until the recovery of the individual economies was on a firm foundation. on bond markets, interest rates continued rising in june and july. since then, they have largely moved sideways. this applies to us, uk, german and swiss government bonds, in particular. until the beginning of september, yields on ten - year confederation bonds rose to almost 1. 2 %. they are currently at around 1 %, which means that they have increased by about half a percent year - on - year. government bonds in the emerging economies were particularly strongly affected by the rise in interest rates, since the expectation of an impending monetary policy normalisation in the us led to significant capital outflows from these countries

it ’ s clear to see why the markets value their service and it is fortunate that, in the london clearing house, london has a first class central counterparty. but clearing houses concentrate risk at a single point. and, by serving multiple markets, they provide a route for disturbance to be transmitted between markets. so the way they manage their risk, particularly as they expand their activities, is important to you, i hope, as much as to us. diversifying across products can provide benefits, particularly if this simultaneously diversifies a clearing house ’ s exposures across existing clearing members. and expansion into new markets where existing members are already active provides clearing houses - and potentially regulators - with more information on members ’ overall trading books which they can use to manage their risk more effectively. diversifying across markets does not, of course, help when, for some reason, the markets all move together. and it is vital, in any case, that clearing houses continue to have robust arrangements for monitoring and controlling risk, including proper margining procedures and adequate financial resources, and that their procedures and ownership structure gives members the incentive to ensure that risk is adequately controlled. that suggests to us that control and ownership of the clearing house should reside with clearing members, who are, in any case, likely to contribute a major part of any mutual guarantee fund. so we welcome the fact that the product of the lch / clearnet discussions is intended to be a non - profit mutual organisation which gives ownership to its users and look forward to as productive a relationship with the new body as we currently have with lch. the topic of this week ’ s conference - putting the dot. com into derivatives - presents challenges but also opportunities. if we can address both, the derivatives industry will be better placed than ever to meet the needs of users world - wide. i wish you all an enjoyable week.