Niklaus Blattner: Review of the Swiss economy: end-of-year media news conference Introductory remarks by Prof Dr Niklaus Blattner, Member of the Directorate of the Swiss National Bank, at the End-of-year Media News Conference, Zurich, 7 December 2001 *  *  *  11 September 2001: a test for the global financial system For a number of years now so-called systemic risks have received increasing attention from the central banks and from banking and financial market supervisory authorities. In extreme circumstances, systemic risks may ultimately lead to a breakdown of the financial system. They have their origin either in a transmission of liquidity and solvency problems between banks and other financial service providers or in the fact that numerous market participants are simultaneously affected by the same non-diversifiable risks. Examples of such risks are sudden, widespread and massive losses in the value of financial assets (stock market crash), serious malfunctioning of major financial market infrastructures, large-scale natural disasters or terror attacks which obstruct markets and market participants in economic or technical and physical respects. The consequence may be a substantial disruption of economic activity. The damage caused to the affected economies is liable to be correspondingly large. The terror attacks of 11 September 2001 hit the central nerve of the global financial system - New York, the major trading centre for the world's leading currency and the preferred location of the international banking and financial services industry.
The events of 11 September have strengthened all the parties' awareness of the extent of international integration in a crisis situation. While the benefits of international cooperation have so far been undisputed, at least theoretically, empirical evidence has now been provided. Cooperation among the authorities in the various countries on the level of the Bank for International Settlements, the relevant committees of central bank governors of the Group of Ten and the International Monetary Fund is to be intensified. 8. A current example of such efforts can be found in the payment systems sector. Any strains on the financial system can spread rapidly as a result of the international integration of participants as well as of payment and settlement systems. Increased attention must be paid to devising and linking systems such as Switzerland's SIC (Swiss Interbank Clearing) and the planned CLS (Continuous Linked Settlement) among others. 9. Further problems which must be dealt with in particular by the private financial industry concern the inadequate geographic diversification of production locations and backup facilities, which have proved less than satisfactory in some cases. 2  BIS Review 101/2001