When the banks’ foreign currency borrowing was not particularly great, this was not a significant problem. However, the growth in borrowing and our experiences from the crisis give us reason to think again. Today, it seems reasonable for the banks to carry the cost of the Riksbank’s foreign currency reserve, in as much as it is needed to meet their liquidity requirements in the event of a crisis. If they were to carry the cost of maintaining a liquidity buffer in the Riksbank, it is likely that the banks would find it profitable to cut back on the riskier areas of their dollar lending. In this case, the Riksbank would also reduce its foreign currency reserve, as the need for a buffer would have decreased. However, the banks should pay a charge to cover the costs of the remaining buffer. The extent to which the banks could imagine reducing the riskier areas of their foreign currency lending, the size of any charge, and how this could be repaid remain to be discussed by the Riksbank and the banks. The rough calculation I made earlier could form a starting point, but I make no claims for it to be any more than that. However, it is essential that this question receives an answer. The present situation is unacceptable in the long run. BIS central bankers’ speeches  11
Andréa M Maechler: Monetary policy in 2015 – a first assessment Speech by Ms Andréa M Maechler, Member of the Governing Board of the Swiss National Bank, at the Money Market Event, Geneva, 19 November 2015. *  *  *  Accompanying slides can be found at the end of the speech and on the Swiss National Bank’s website. The speaker would like to thank Dirk Faltin, Marco Huwiler and Bettina Simioni for their valuable support in preparing this speech. She is also grateful to Vincent Crettol and Peter Kuster for helpful comments and SNB Language Services for their assistance. Ladies and gentlemen It is my great pleasure to welcome you tonight to our traditional Money Market Event. I feel very honoured to be here in Geneva, the city of my birth, giving my first public speech for the Swiss National Bank (SNB), having joined the Governing Board in July this year. It has been a very eventful year for monetary policy in Switzerland. In January, the SNB took two momentous decisions: It discontinued the minimum exchange rate against the euro, and lowered the interest rate on sight deposits further into negative territory. Thus, the SNB’s monetary policy has changed significantly. Tonight, I shall provide a first assessment of this new monetary policy environment. My speech is divided into three parts. First, I shall discuss the SNB’s monetary policy since the discontinuation of the minimum exchange rate, and the impact on the Swiss franc exchange rate.