For example, when in late 2004 the Bank announced our intention to introduce reforms, the European treasury department of one of the largest companies in the world wrote to me in the following terms: “I write to express our support and appreciation ….. The excessive volatility in the overnight market precluded high-quality issuers .. from participating. …The steps you are taking will surely increase the depth, stability and overall liquidity of the sterling money market.” That kind of support has been a great encouragement. In terms of risk management, many companies swap fixed-rate term borrowing (and other cash flows) into floating-rate. This can be into a six or three-month LIBOR rate of interest, or into a stream of payments linked to the overnight money market rate. In the UK, the Overnight-Index-Swap market has developed rather less than its counterpart in the euro area, which is used by large non-financial companies. One obstacle seems to have been the intra-day volatility in the sterling market, which has entailed uncertainty about the spread between the average overnight rate on any particular day (as measured by the Sterling Overnight Rate Index Average, or SONIA) and the rate actually paid on overnight cash at different times during the day. Many market participants believe that if the reforms introduced yesterday significantly reduce intra-day volatility, the sterling OIS swap market will grow, making it a more useful risk management tool. The evidence of corporate treasurers as placers of short-term money is more concrete.
Thomas Jordan: Innovation and entrepreneurship - key success factors in a changing business environment Summary of a speech by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the Award ceremony 2018, De Vigier Foundation, Solothurn, 30 May 2018. * * * The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). For many decades, Switzerland has been among the world’s most successful economies. If it is to maintain this position in future, openness to new technology will be essential. In addition to taking over technologies created elsewhere, Switzerland will need to ensure that domestic companies are able to develop their own market-ready innovations. Various factors can facilitate success on this front, whether in established companies or startups. Above-average operating conditions – including low bureaucratic hurdles for the set-up and day-to-day running of companies, reliable patent law and ready access to financing, for example – are crucial. Another important parameter is open market access, not least for foreign competitors; barriers to entry for new firms are extremely harmful to economic wellbeing. The education system is also a significant determinant of a country’s innovative potential. Switzerland invests heavily in high-quality education, both at university level and in the form of specialist vocational training schemes, which helps explain its status as a global leader in research and development. And finally, it is vital to promote a culture of entrepreneurship.