Yet, the SNB has no information advantage over banks, which make this decision today in a competitive environment, taking into account the local circumstances and needs of various industries. The new division of roles would therefore be inefficient and would turn the SNB into a central authority steering industrial policy. Just imagine companies in a particular industry, be it automotive suppliers, the textile industry or the hotel trade, struggling to obtain loans. How should the task to ensure credit supply be interpreted? Would the SNB have to step in where, under the current system, no loans would be granted? A centralised, statecontrolled credit supply does not befit our federalist, business-friendly country and would jeopardise the Swiss success model. The ‘debt-free’ payments to the Confederation, the cantons or the people are also fraught with problems from an economic order perspective because the SNB would then be directly involved in the debate on distribution issues. Who should get how much? Such decisions are a matter of fiscal not monetary policy. ‘Debt-free’ payments would politicise the SNB and would detract from our ability to perform our real task of ensuring price stability. Conclusion Ladies and gentlemen, the financial system has evolved steadily over the years since the Institute of Banking and Finance at the University of St. Gallen was established. The authors of the Swiss sovereign money initiative want to convince voters that a transition to sovereign Page 7/8  money would just be another minor change to the system. This is misleading.
If I had to choose a motto for a central banker, I think “better safe than sorry” would be very high on the list! More importantly we collectively showed that the London markets were equal to the challenge - even a once-in-a-millennium challenge - and were determined to make sure that come the first day of the new year London would be “open for business as usual”. What of the coming year? Well, I can predict that, after two years of new year working, we will all be able to enjoy our New Year’s Day bank holiday for a change next year! But beyond that, my crystal ball is no better than yours, and I am afraid that if you are looking for me to predict the course of exchange rates or interest rates over the next 12 months I am going to disappoint you. I would like instead to pick out a few themes which I think will be of increasing importance as the year unfolds. Firstly, I think we will increasingly see a fall in the absolute size of government bond markets, although once again Japan remains the exception. This is already happening here in the UK and in the US, as fiscal surpluses reduce bond issuance, and as the recovery in the rest of Europe continues budgets will increasingly move towards balance there too.