15 The SNB, in its Financial Stability Reports from 2003 onwards, pointed out that both big banks were highly leveraged in an international comparison. 16 Together with the SFBC, the SNB was also an early advocate within the Basel Committee on Banking Supervision of an international tightening of capital requirements for big banks. However, these calls failed to garner enough support, and, due to 12  For example, cf. Stulz (2008) and Basel Committee on Banking Supervision (2016). 13  For example, cf. UBS (2004), p. 7: ‘We have an ambitious vision – to be recognized as the best global financial services firm. We are the world’s largest wealth manager, while in the investment banking and securities business we are in a select bracket of major houses.’ 14 Cf. Control Committees of the National Council and the Council of States (2010), p. 3104. 15 Cf. FINMA (2009), p. 22. 16 For example, cf. Swiss National Bank (2003). Page 7/14  considerations relating to international competitiveness, it was decided that Switzerland would not go it alone. 17 At the same time, the Swiss authorities and banks, like their peers elsewhere, also fell victim to the widespread over-reliance on models, leading to a distortion of risk assessment. Thus in 2004 the SFBC, for instance, granted UBS permission to use its own adapted risk model to assess the market risk, i.e. the financial risk, stemming from changes in the market valuation of the bank’s assets.
A data-dependent normalization means policymakers need to see tangible evidence of a solid recovery, prior to any policy tightening. 2/4  BIS central bankers' speeches  Given the fragile recovery policymakers would be best advised to lean on the side of caution. Faced with additional shocks, we believe our priority should be to offer additional accommodation to the economy. However, policy makers should be careful in getting the policy mix right so that potential long-term costs do not outweigh short term benefits. To that extent, we believe: Fiscal policy should provide additional support, subject to existing fiscal space. So far, public sector sin the developed economies have little financing constraints, partly on account of massive injections of liquidity from central banks. The same appears to be true also for the emerging market economies, such as Albania, which continue to enjoy both market access and relatively low financing costs. However, the fiscal authorities of emerging market economies should be mindful on the need to preserve market credibility on the sustainability of their finances. Financial intermediaries – such as banks – have also shared their fair share of the burden. They would naturally absorb a large part of the additional financial costs incurred in case of further shocks. However, financial and macroprudential policies should avoid the temptation of shifting an ever increasing part of the cost on the banks’ balance sheets. Financial stability and a robust banking sector remain paramount for the long-term growth. Finally, monetary policy should offer additional stimulus.