Most countries are still in the expansionary phase of the financial cycle, and a real test in the form of a financial crisis has –  3 4 5  Cf. https://www.finma.ch/en/documentation/self-regulation/ (consulted on 21 March 2022). Cf. https://www.snb.ch/en/mmr/reference/pre_20130213/source/pre_20130213.en.pdf (consulted on 21 March 2022). Cf. BCBS (2019), Guiding principles for the operationalisation of a sectoral countercyclical capital buffer. fortunately – not yet occurred. It is therefore essential that we update our assessment as we gain more experience, and as more and better data become available. Containing the build-up of vulnerabilities  Let me start with an assessment of the instruments that aim to contain the build-up of vulnerabilities. International empirical evidence available so far shows that borrower-based instruments such as caps on LTV and LTI ratios have helped to slow down mortgage lending and real estate price growth. 6 This has contributed to dampening the build-up of vulnerabilities, without being able to prevent them completely. Research also clearly highlights that macroprudential policymakers need to be forward looking, given that there are long lags between policy announcements and policy effects. A similar conclusion holds also for Switzerland. Unlike many other countries, Switzerland had not seen a housing boom before the GFC, and accordingly no bust thereafter. Instead, residential real estate prices have increased moderately but very persistently since then, prompting responses by macroprudential authorities.
To meet this expectation, an FSB steering group has coordinated working groups for each of the major IBOR benchmarks. The mandates of these groups are to identify alternative rates and to begin transitioning to them. In 2014 the Federal Reserve convened the Alternative Reference Rates Committee (ARRC) to plan the transition away from U.S. dollar LIBOR.8 The ARRC conducted two public roundtables, published a written consultation, and created an advisory group of end users across market sectors. The ARRC’s criteria for U.S. dollar LIBOR’s replacement included methodological quality, accountability, governance, and ease of implementation. In the end, the ARRC recommended a new rate that the New York Fed had proposed in cooperation with the Treasury Department’s Office of Financial Research.9 The new rate is called the Secured Overnight Financing Rate (SOFR). The New York Fed has published SOFR every day since early April of last year. 10 SOFR measures the cost of overnight borrowings through repo transactions collateralized with U.S. Treasury securities, which is the deepest and most liquid money market in the U.S. It is based on actual transactions and takes in more transactions than any other Treasury repo rate available, recently around a trillion dollars each day. SOFR is relevant to the cost of borrowing for a wide array of market participants, was constructed to meet the best practices for benchmarks set out by IOSCO, and is built to accommodate future market evolution.