speech embargo 9 november 2023, 6. 15 pm a pillar of financial stability – the snb ’ s role as lender of last resort alumni wwz basel martin schlegel * vice chairman of the governing board swiss national bank basel, 9 november 2023 © swiss national bank ( speech given in german ) * the speaker would like to thank raphael reinke for his support in preparing this speech. he also thanks marc blatter, jeannette henggeler - muller, christoph hirter, michael schafer, jacqueline thomet and pascal towbin, as well as the snb language services. page 1 / 9 ladies and gentlemen today is ‘ national future career day ’, when girls and boys throughout switzerland accompany their parents to their workplace and spend the day watching them at their jobs. 1 i too had a visitor at work today, and once again i found that children bring fresh perspectives and often ask quite fundamental questions. this is precisely what i want to do in my speech today : to take a close look at a core task of the snb in relation to financial stability – its role as lender of last resort. in this role, the snb made up to chf 168 billion in liquidity available for managing the crisis at credit suisse this spring. such a number is hard to grasp. it corresponds to approximately one - third of credit suisse ’ s balance sheet total at the time, or double the annual expenditure of the swiss confederation. 2 why is the snb the lender of last resort and why does it provide liquidity assistance in this capacity? how does it provide this liquidity? what conditions does it set, and to whom does it provide liquidity? these are the fundamental questions i want to address today, while also taking an in - depth look at the challenges and limits involved. i will conclude by talking about the liquidity assistance provided to credit suisse. the role as lender of last resort acting as lender of last resort means that a central bank makes liquidity assistance available to banks when they suddenly need substantial liquid funds which they are no longer able to obtain on the market. it is an important part of a central bank ’ s contribution to the stability of the financial system. 3 the reason why this role is necessary lies in the nature of the traditional banking business. on the one hand, banks accept deposits from savers. on the other, they grant loans. in so doing they bridge the

. in activating the countercyclical capital buffer, the aim of the authorities is twofold : first, it should increase the resilience of the banking sector, thereby helping to protect against the consequences of a correction of excessive credit growth. second, it should help to lean against the build - up of such excesses. the federal council decides on the activation, deactivation and level of the countercyclical capital buffer, upon the proposal of the snb. the snb consults finma before submitting its bis central bankers ’ speeches proposal. the proposal will be based on an in - depth analysis and assessment of the situation on the swiss credit market, which will, in principle, be carried out once a quarter. 1 the signs of a build - up of imbalances on the swiss credit market relate to the residential mortgage segment. thus, if the buffer had to be activated, it would be aimed solely at this segment of the credit market. when assessing the necessity of activating the buffer, the snb will take into account the impact of other recently announced measures focusing on the mortgage and real estate markets. these measures include a further revision of the selfregulation rules and a tightening of risk weightings for mortgage loans. in addition, as part of its monetary policy mandate, the snb will closely monitor the impact of a possible activation of the countercyclical capital buffer, in order to assess the consequences for the economy as a whole. the current situation justifies the fact that this instrument, scheduled for implementation under basel iii, has been made available to the swiss authorities at an early date. numerous past crises have highlighted the costs associated with credit market excesses. even if the countercyclical capital buffer does not enable us to prevent the build - up of all imbalances in the swiss credit market, it should help to reduce these costs in the future, provided it is activated early enough for its preventive properties to take full effect. swiss national bank, “ implementing the countercyclical capital buffer in switzerland : concretising the swiss national bank ’ s role ”, fact sheet, june 2012 ; available at www. snb. ch, financial stability, publications. bis central bankers ’ speeches