As regards economic developments, we are aware that the discontinuation of the minimum exchange rate means that there are difficult times ahead for Switzerland. We have every confidence that Switzerland’s economy and its economic agents will rise to the challenge and adjust to the strong Swiss franc. The last few years have provided an impressive illustration of just how exceptionally adaptable this country’s entrepreneurs are. The Swiss franc is significantly overvalued and while it is expected to weaken over time, until it does, this substantial – and above all abrupt – appreciation of the currency will present considerable challenges. I repeat: My colleagues on the Governing Board and I have great respect for the business community whose task it will be to make these difficult adjustments. BIS central bankers’ speeches  7  8  BIS central bankers’ speeches  BIS central bankers’ speeches  9  10  BIS central bankers’ speeches  BIS central bankers’ speeches  11
First, globally it is not normal for prudential regulators to have an actual competitiveness objective – to my knowledge there is only one example amongst 3/5  BIS central bankers' speeches  the main prudential regulators. I worry therefore that having such an objective might be seen by others as an intention to weaken regulation in the UK, and thus undercut our authority in international bodies. I also think it’s a bit of a red herring. A robust prudential regime focussed on objectives of safety and soundness and policyholder protection is part of the national infrastructure that underpins the attractiveness of UK firms as counterparties. Second, it is wise not to give regulators too many objectives and have regards. Loading something up with ever more objects is an excellent way to decorate your Christmas tree but it’s not the best way to create an effective regulator. Solvency II Review So much for theory. What about practice? In particular the main event of this year: you may think it is defeating Covid, but of course it is in fact the review of Solvency II. I don’t want to bore this audience (any more than I have already) with a discussion of detailed measures. But I have a few brief points to make about the review itself. Perhaps most importantly, the review will stay true to the basic principles of Solvency II.