Today, I would like to focus on this challenge by analysing the context in which the SNB manages its foreign exchange reserves. While a number of problems are shared by both the SNB and other large investors, there are certain features that are specific to a central bank; I will return to these in a moment. My presentation is structured as follows: First, I will outline the latest developments in the SNB’s foreign exchange reserves. Second, I will describe the principles underlying the management of these reserves. Third, I will comment on the current allocation of reserves, based on the results for the third quarter of 2012, which have just been published. I will conclude by setting out the main challenges facing the SNB in the management of its foreign exchange reserves. Substantial growth of foreign exchange reserves since the start of the crisis A first key observation is that the SNB’s balance sheet has grown significantly since the onset of the crisis (cf. slide 1). It is currently around four times its pre-crisis level, at nearly CHF 500 billion, with foreign exchange reserves amounting to nearly 70% of GDP. Such a sizeable expansion is by no means unique; other central banks have also seen their balance sheets grow considerably. However, the SNB stands out because of the very rapid expansion in its foreign exchange reserves (cf. slide 2). It is important to note that this growth results directly from the SNB’s monetary policy, and not from any investment choices.
It is important to remember that the SNB’s activities must primarily be measured against the effectiveness of its monetary policy as well as the financial return on its investments. Conclusion To conclude, let me reiterate two points that have come up several times during my remarks. First: While the SNB is a global investor, it is also a special investor and rather far removed from the classical definition that applies in the private sector. Its investments are the direct result of its monetary policy. That policy continues to have priority over purely profit considerations in financial terms. The SNB must also meet specific requirements when selecting investments; return is obviously a factor, but it also needs to take risk and market liquidity into consideration. Finally, it must invest a significant volume of funds without disturbing the markets. This can prove difficult, and requires transitional periods in order to achieve the desired allocation. Second: The SNB tries to pursue the most efficient investment strategy possible. The fact that several central banks inform themselves about and are inspired by our experiences goes to show that we are sometimes an example for them. In so doing, the SNB also tries to be as transparent as possible, thereby meeting its duty to inform the public. The investment strategy is largely made public, and we are one of the few central banks to publish its results on a quarterly basis. Ladies and Gentlemen, I have now come to the end of my remarks.