For example, unemployment has risen markedly and manufacturing is suffering from the continuing low level of technical capacity utilisation. Finally, the events of the past two and a half years have shown exactly how vulnerable our country is in the event of a banking crisis, particularly one involving large banking institutions. I would therefore like to begin by outlining a few of the Swiss National Bank’s thoughts on the “too big to fail” issue. I will then briefly review our monetary policy in 2009, and describe the  BIS Review 59/2010  1  challenges facing the SNB in this area. In the final part of my speech, I will address the recent discussion surrounding the appropriate level of inflation. II. The “too big to fail” issue  Without appropriate countermeasures, Switzerland would remain very exposed to any fallout from a banking crisis. True, the big banks have substantially cut their balance sheets, something which the SNB explicitly welcomes. Yet the size of those balance sheets still represents a multiple of our country’s GDP. And the big banks continue to hold a dominant position in domestic lending and investment business. They are thus still “too big to fail”. In a comparable crisis, the government and the SNB would once again face an impossible choice: either they accept the devastating consequences of a big bank failure for the Swiss economy, or they take on the considerable financial risk of stabilisation measures.
It is ironic that only when problems in advanced economies led to contagion elsewhere and large number of central banks entered into such swap agreements with the Federal Reserve, did the IMF agree to such an instrument. This also reconfirms the need for greater voice and representation of emerging markets in important international financial institutions (IFIs) as highlighted in the recent G-20 Summit Declaration. While the reform is underway under the IMF, it is only with hope that other fora, including, the FSF will take the issue into consideration more seriously. Let me elaborate further on the importance of having emerging markets participated in the systemically important international fora. I think you all agree at this advanced economies or emerging markets are all prone to sectoral imbalances, which, if left unchecked, can lead to a full-blown crisis, anywhere, any time, when the bubbles burst. The impact of a crisis in an advanced, systemically important country can be much broader and deeper, creating a larger scale of world-wide externality. Emerging markets, unlike others, have had our share of coping with new challenges brought on by this phenomenon as well as those created by us one decade ago. It is, therefore, not only the responsibility of advanced countries to be in charge of global surveillance but also the responsibility of emerging markets to share our views and experiences of how to reform ourselves to be better prepared for greater uncertainty.