As the interest rate differential had hardly changed, and these countries’ currencies were less sought after as safe havens than the Swiss franc, they were subjected to considerably less upward pressure against the euro than the Swiss currency. The situation in Switzerland was made even more difficult by the fact that, as a result of the minimum exchange rate, both the Swiss franc and the euro lost value against the US dollar and the pound sterling. This put the broad overvaluation of the Swiss franc that had led to the introduction of the minimum exchange rate into perspective. Both of these factors, i.e. the disappearance of the interest rate differential and the reduction of the overvaluation, finally led to rapidly increasing pressure on the minimum exchange rate. At the beginning of 2015, it became clear that the minimum exchange rate of CHF 1.20 per euro was no longer sustainable from a monetary policy perspective, and would require everlarger foreign currency purchases to enforce it. If the SNB had ignored the changing reality and attempted to maintain the minimum exchange rate, the extensive interventions would have led to the bank losing control over its balance sheet and thus over longer-term monetary conditions in Switzerland. Putting this decision off would also not have helped the economy. The minimum exchange rate was introduced as an instrument against widespread and extremely pronounced Swiss franc strength. In this new phase of general euro weakness, it was no longer the right tool.
Your Honour, This conference follows a similar one held in Botswana hosted by the Botswana Central Bank from 5 to 6 February, 2007 and supported by the BIS Governance Forum and the IMF. It also comes shortly after our very successful conference held at this same venue in November last year on the theme, “Central Bank Independence, Does It Hurt the Treasury?” All these activities are part of the building blocks to a bigger project we have been undertaking in the SADC region aimed at developing a Model Central Bank Act. For us in Zambia, efforts at perfecting the governance as well as the operational efficiency of the financial sector are being done through the Financial Sector Development Plan (FSDP). Under the Plan we have already developed Corporate Governance Guidelines for the financial sector as a whole. Many of these have a lot of relevance to the Central Bank as well. Through the FSDP, even issues such as who should chair the Board of the Central Bank are being discussed. Lastly, let me say that we expect to learn from what other central banks have done, and what challenges they have faced in their quest for enhanced central bank governance. However, it should be noted that each country should establish a legal framework for its central bank governance, which best fits that country’s own history and institutional evolution. This should also take into account international best practice.