22  All speeches are available online at www.bankofengland.co.uk/news/speeches  22  Chart 15: FPC housing tools more efficient than monetary policy for addressing the same risks  Risks increasing as the GDP-at-risk tail grows larger  1yr ahead median GDP growth 4.0 forecast (%)  2004  If FPC housing tools had been in place  2004 2007  2014  3.5  3.0 2000  2015  2006  2.5 2005  If monetary policy acted to achieve same reduction in GDP-at-risk  1998  2001  2003  2017 2.0 2016 2010 2002  2013 1.5 2018  2008 2019  2011 1999  1.0  0.5  3yr ahead 5th percentile GDP growth estimate (%, cumulative)  2012  0.0 -6.0  -5.0  -4.0  -3.0  -2.0  -1.0  0.0  1.0  2.0  The FPC’s structural and cyclical bank capital requirements The UK’s bank capital framework optimises the FPC’s objective function by balancing the impact of higher capital on GDP-at-risk with the impact of higher capital requirements on the central GDP forecast. 𝑇  min ℒ𝑡 ≡ 𝐸𝑡 {∑ 𝛽 𝑖 [𝑓(𝐺@𝑅𝒕+𝒊 ) − 𝜙𝑦𝑡+𝑖 ]} 𝜌𝑡  𝑖=0  The capital framework includes structural requirements that are not designed to vary systematically over time, and a cyclical requirement that varies with the financial cycle to match the level of resilience with the level of GDP-at-risk.
With these guidelines, the different systems can be monitored consistently, while at the same time keeping the administrative effort of the operators at an acceptable level. Business Continuity Planning (BCP) Different experiences in the recent past – from the 9/11 terrorist attacks in the United States to minor local technical difficulties – suggest that measures to strengthen the operational resistance of the Swiss financial sector must be taken. During the past year and a half, the SNB has headed a sectoral working group in cooperation with the SFBC secretariat. The group consists of representatives from infrastructure providers, financial institutions and the authorities and has conducted an in-depth analysis of the business continuity plans of the major players in the financial markets. The Business Continuity Planning (BCP) project focuses on precautionary measures to prevent the likelihood of disruptions. In addition, measures are taken to help cope as efficiently as possible with disruptions, once they have occurred. In its analysis, the working group focused on the two business processes which were considered to be especially critical for system stability and which must be maintained without fail even in exceptional circumstances. Firstly, the supply of liquidity to the financial system with central bank money by means of repos and, secondly, large-value payment transactions between the commercial banks in Swiss Interbank Clearing (SIC). The analysis began with the following scenario: a severe disruption causing the failure of an important operational centre and incapacitating its staff.