The SFR plays a minor part on the stage of the global currency game - it is a dwarf among giants, so to speak. Its position may be described by means of three indicators. First, by the SFR's share in the global turnover in foreign exchange trading. Volume composition in Forex (Daily foreign-exchange transactions, $ billion 500 450  Tradi ng wi t h ot her currenci es Tradi ng wi t h US dol lar  430  400 350 300  300 250 200  158 291  267  101  100  73 44 79  £  Y  DM  0  58  42  AUD  50  FFR  118  CHF  150  This chart is based on data collected by the BIS in 1998, i.e. during the period prior to the introduction of the euro. The columns illustrate the composition of an average daily volume of approximately 1.5 trillion USD by currencies. The USD clearly predominates. This is shown by the size of the lower areas, which represent the respective trading volume vis-à-vis the USD. It seems very likely that the advent of the euro has not significantly changed the pre-eminence of the dollar. The new figures to be expected this year will be instructive in this regard. The SFR accounted for USD 100 billion, i.e. approximately 7% of the total daily volume in 1998. This may seem modest, but relative to the size of our economy it is a very respectable figure.
But post-crisis, bank profitability has come under pressure in a prolonged period of low growth and low interest rates. •  The banking industry’s return on equity (ROE) has fallen significantly since the financial crisis. •  The average ROE of the 200 largest banks has fallen from 17% before the crisis (2005–2007) to 9% in the period 2011–2013. Monetary policy, as it comes up against diminishing returns at the zero lower bound, is also not helping bank profitability. As policy rates are pushed into negative territory in a growing number of countries, the implications for financial stability need to be assessed carefully. In a low or negative interest rate environment, banks are likely to engage in market segmentation and charge different rates to different groups of clients. •  Banks are reluctant to impose negative interest rates on retail depositors. •  This means that, to make up for the interest they have to pay on their deposits with the central bank, they may have to charge a higher interest rate on their borrowers. High returns during the pre-crisis period were in part due to excessive risk taking or leverage, coupled with insufficient capital buffers against these risks. •  This has proven both untenable and perilous. •  A reduction in leverage and an increase in capital requirements are therefore desired outcomes of the reform agenda, to restore more prudent business practices and provide more sustainable finance over cycles. But sustainability in finance requires that banks are reasonably profitable.