They show the observed intraday frequency of certain fluctuations in yield on US or Japanese government bonds for the period since 2001. Fluctuations of the magnitude described here are extremely rare events. Such episodes prompted fears that market distortions of this kind could recur at any time. What do these changes in market liquidity mean for the SNB? At the operational portfolio management level, we are affected by the deterioration in corporate bond liquidity. The greatest difficulty stems from the fact that trading is increasingly focused on a comparatively small section of the corporate bonds outstanding. This has meant that large purchases or sales are more difficult, and more expensive, than before the financial crisis. This, in turn, has necessitated some adjustments in the way corporate bond portfolios are managed. The SNB is now more active in the primary sales market than before, and has also expanded its counterparty base. In addition, depending on the liquidity situation, transactions are having to be split into smaller tranches. Overall, therefore, the management of corporate bond portfolios has become more complex and more demanding. By contrast, the markets for highly rated government bonds continue to be very liquid. Shortterm price fluctuations do not place any limitations on the management of the government bonds in our portfolio. As I have already mentioned, we have a very long investment horizon. We hold our investments for at least one full economic cycle and we are not obliged to sell, even in periods of stress.
The possibility to create new access channels provides opportunities for nimble firms that are not banks to act as middle men and provide interfaces that facilitate the initiation of the underlying, more old-fashion payment. Remember that payment initiation services and third-party providers have been at the centre of the discussions on the new Payment Service Directive. These firms don’t compete outright with the banks and in some cases they may even directly cooperate with them. In other cases, the non-bank may compete directly with the banks. It may even have built its own infrastructure or account structure through which it processes payments. This is most likely in cases where the non-bank already has a kind of network that it can adapt and utilize for payments. Telecom operators and Internet service providers are examples of such firms. A concrete example of such a case is M-Pesa, the mobile payment service launched by SafariCom in Kenya. Initially intended for person-to-person payments, it quickly became a success and a platform for a number of financial services. Non-banks can also act as suppliers of services to the banks, e.g. payment switches routing the payment information or the outsourcing of back-end services such as the operation of large IT-platforms, etc. These are all essential inputs for payment intermediation. Because non-banks can enter the payment process in so many places, we have longer and more complex payment processes with more actors involved. Banks, at least for some type of payment services, have less direct contact with the end-users.