We did not see some of the critical vulnerabilities these changes had created, including the large number of self-amplifying mechanisms that were embedded in the system. Nor were all the ramifications of the growth in the intermediation of credit by the nonbank or “shadow banking” system appreciated and their linkages back to regulated financial institutions understood until after the crisis began. With hindsight, the regulatory community undoubtedly should have raised the alarm sooner and done more to address the vulnerabilities facing our banks and our entire financial system. But this was difficult because our country didn’t have truly systemic oversight – oversight that would be better suited to the new world in which markets and nonbank financial institutions had become much more important in how credit was intermediated. Without a truly systemic perspective, it was unlikely that any regulator would have been able to understand how the risks were building up in our contemporary, market-based system. The problem was that both banking and nonbank organizations played an important role in credit intermediation but were subject to differing degrees of regulation and supervision by different regulatory authorities. Although these gaps had existed for years, their consequences were not apparent until the crisis. Difficulties in one part of the system quickly exposed hidden vulnerabilities in other parts of the system, in a way that our patchwork regulatory system had not been designed to detect or readily address.
Moreover, our new forecast, which as always takes account of today’s decision, shows that a further tightening of monetary policy cannot be ruled out in the coming quarters. However, the environment continues to be subject to a high degree of uncertainty. Let me now say a few words about the exchange rate. The Swiss franc has appreciated in trade-weighted terms by around 7% since the monetary policy assessment in June. This appreciation helps to tighten monetary conditions and dampen inflationary pressure. In order to set appropriate monetary conditions, we remain willing to be active in the foreign exchange market as necessary. If there were to be an excessive appreciation of the Swiss franc, we would purchase foreign currency. If the Swiss franc were to weaken, however, we would consider selling foreign currency. Period of negative interest rates comes to an end  With today’s decision, an extended period of a negative SNB policy rate comes to an end. Negative interest was introduced at the beginning of 2015 to counter upward pressure on the Swiss franc associated with the discontinuation of the minimum exchange rate. Over the past years, negative interest has helped to dampen the appreciation of the Swiss franc and to ensure price stability. At the same time, we were always aware that negative interest can have undesirable sideeffects and presents challenges for many economic agents. On the whole, however, negative interest has proved its worth.