##lateral approach to financial stability that until now has proven very effective. this was best demonstrated by the g20 reforms following the great financial crisis. these reforms have served the financial system well during the covid pandemic. greater resilience of major banks at the core of the financial system has allowed the system to absorb, rather than amplify, the economic shock. without the g20 reforms, governments would now have to deal with a crippled banking sector in full deleveraging mode, on top of an economy hit by covid restrictions. we would have had a crisis within a crisis. in my view, this success is in large part thanks to the g20 ’ s commitment to dealing with global challenges together, and to the fsb ’ s broad membership, its agility and its engagement with other stakeholders. we will need to fully use these strengths, to which i will return later on, if we want to tackle the new financial stability challenges successfully. so let me now discuss the nature of these challenges and what it means for the work of the fsb in the coming years. a big challenge for policy makers worldwide at this moment is navigating their economies out of the covid pandemic. two years after its onset, the economic fall - out of the pandemic appears to be subsiding, and the extraordinary fiscal and monetary support measures that kept economies 1 / 4 bis central bankers'speeches afloat are being gradually unwound. but as the economic recovery is proceeding at an uneven pace across regions, this unwinding process is increasingly likely to be asynchronous. this creates the potential for cross - border spill - overs. moreover, since the onset of the pandemic, both public and private sector debt have increased, while asset prices have grown amid a search for yield. this has made the global financial system more vulnerable to a disorderly tightening of financial conditions — a concern that has been accentuated lately by the return of high inflation. the fsb is monitoring and analysing developments closely and stands ready to facilitate global coordination of financial policies, where necessary, to minimize the risk of a disorderly exit. this is being underpinned by the fsb ’ s new financial stability surveillance framework. the framework enables us to identify global financial vulnerabilities in a systematic manner. it draws on the collective expertise of the fsb ’ s broad membership. it places particular emphasis on incorporating multiple perspectives in the identification and assessment

with a view to limiting the exchange rate, credit and concentration risks of its foreign currency investments. the snb had already begun diversifying its investments in the late 1990s. the snb foreign currency investments are considerably more diversified than those of many other countries, with many central banks investing their foreign exchange reserves mainly in us treasuries, that is, in public debt titles and in dollars. while the snb also holds the large majority of its portfolio in the form of government securities, it also currently holds as many as 10 % of its reserves in equities and 5 % in corporate bonds. in order to limit credit risk, the large majority of our public debt holdings have the highest ( aaa ) or second - highest rating ( aa ). in effect, our current allocation corresponds to 86 % aaa - rated and 13 % aa - rated public debt holdings. the snb diversification strategy is, however, subject to limits. these spring from the stringent requirements with regard to the security and liquidity of the investments. many investment markets are too narrow, and do not meet the snb ’ s liquidity requirements. the snb ’ s investment universe – and thus its scope for diversification – is therefore limited. the bulk of the worldwide supply of highly rated public debt instruments is denominated in euros and us dollars. it is thus due to the instruments available on the market that the largest part of our foreign currency investments is in euros ( 55 % ) and in us dollars ( 25 % ). the remainder of our investments is composed of yen ( 10 % ), canadian dollars ( 4 % ), pounds sterling ( 3 % ) and other currencies ( 3 % ). finally, taking a general and somewhat longer - term view, the following point should be noted. the snb ’ s currency reserves are made up of foreign currency investments and gold. in a risk - averse environment, losses tend to occur on foreign currency investments and profits on gold, while in a risk - friendly environment the opposite is true. consequently, diversification of a portfolio to include gold and foreign currency helps to stabilise earnings over an entire risk cycle. bis central bankers ’ speeches