The reserves policy adopted by the Bank Council bears the hallmark of common sense, aiming for a gradual rise in the level of monetary reserves so that the relationship of reserves to GDP does not deteriorate over time. This approach is consistent with the fact that, at present, we only have a moderate level of reserves. Those who believe that the SNB has surplus monetary reserves overlook the fact that Switzerland's central bank constitutes a form of insurance with respect to the monetary stability of the country. Like all kinds of insurance, the National Bank – faced as it is with expanding markets and increasing risks – must be able to rely on its reserves growing in tandem with the economy. If they did not do so, its ability to operate on the markets would be weakened. In this respect, it is the country's long-term interests that must not be lost sight of. The debate on the Cosa initiative (under which SNB profits would be used for the AHV/AVS, the Swiss old age and survivors' insurance scheme) is another example of a political move that could lead to a weakening in our monetary credibility. This initiative would hinder us in fulfilling our mandate, and last year I had the opportunity of explaining to you in detail why this is so. Allow me to briefly reiterate these reasons.
This would mean that last year's results were good, but no more than that. To hope that the SNB could distribute considerably more than CHF 1 billion in profits over a sustained period is tantamount either to forcing it to take more risks in managing its reserves, or to cutting back the level of funds set aside as currency reserves. In other words, its position on the markets would be weakened. Given our current level of reserves, this would be unwise. Dear shareholders Dear guests The Swiss National Bank must retain the confidence of the population and the markets if it is to conduct its policies effectively. The Cosa initiative is playing with fire. It constitutes a permanent  4  BIS Review 34/2006  invitation to press never-ending financial demands. It places the SNB at the centre of a permanent political debate which threatens both its credibility and the effectiveness of its policies. That is why good sense dictates that it be rejected. The SNB needs the support of everyone in this tricky phase and, in particular, the support of its shareholders. I would like to thank you for your attendance today, and for your continual interest in our activities. BIS Review 34/2006  5