Note that I use the term reasonable scenarios, which means in practice that in practical forecasting work we disregard certain kinds of scenario. Examples of scenarios that we choose to disregard include a decision to abandon the inflation target, the outbreak of war, major natural disasters or an epidemic that infects a large part of the labour force. We ignore such scenarios partly because they are very unlikely and partly because they would entail a radical change in the preconditions for monetary policy. If such a scenario did nevertheless occur, we would have to decide what would be required of monetary policy at the time. The financial crisis can also be seen as a kind of extreme scenario, even though this was not an event that could be regarded as being highly unlikely. Most analysts believed that there was a clear risk that the problems that arose on the financial markets in 2007 could get worse. The problem was that the crisis not only became unusually severe; it also took a course that few of us could predict. The crisis spread throughout the global economy through various international financial links and fundamental functions in the financial system were seriously disrupted. This had dramatic, negative effects on, for example, the possibilities of companies to get funding and on world trade. This was a case of crisis mechanisms that we had very little experience of and that were therefore not included in our forecast models.
Jean-Pierre Danthine: Situation at Swiss banks from a financial stability perspective Introductory remarks by Mr Jean-Pierre Danthine, Vice Chairman of the Governing Board of the Swiss National Bank, at the media news conference of the Swiss National Bank, Berne, 19 June 2014. *  *  *  As my colleague Thomas Jordan has explained, economic and financial conditions continue to be challenging. Against this background, I would like to examine the situation at Swiss banks from a financial stability perspective, looking first at the big banks and then moving on to a discussion of domestically focused banks. Big banks: strengthening resilience Over the past year, the Swiss big banks have further improved their capital situation. In terms of loss-absorbing capital – defined as Common Equity Tier 1 capital plus high-trigger contingent capital instruments – their risk-weighted capital ratio either already exceeds or is close to the 13% requirement that will apply from 2019. They also meet or are very close to meeting the corresponding leverage ratio requirement of 3.1%. In terms of total capital, both big banks have also substantially improved their ratios. However, they have yet to meet the corresponding requirements applicable from 2019.1 The SNB welcomes the significant progress made by the big banks in improving their capital situation and their compliance with some of the requirements applicable from 2019. The SNB recommends that they continue to improve their resilience and, in particular, their leverage ratios. This is important for two reasons.