Enron had extensive links with banks and other financial firms, mediated in part through the use of relatively new credit risk transfer instruments. Tracing these exposures through to their ultimate owners is not a particularly straightforward business - an issue that we at the Bank have been raising in a macro-prudential context for some time now, most recently in our December Financial Stability Review. But on current information, the residual exposures do not appear unmanageable. Indeed, the apparent dispersion of exposures may even turn out to demonstrate the effectiveness of these markets in spreading risk. BIS Review 18/2002  3  The Bank does not have any direct locus on the accounting and corporate governance issues raised by the case. But the way in which firms' financial performance is overseen and presented does have an important bearing on the disciplines applied by financial markets, which are an essential component of maintaining financial stability in the wider sense. Public confidence in financial statements and the role of auditors is critical. One set of issues relates to the appropriateness of accounting rules governing the treatment of special purpose vehicles and those relating to revenue recognition. This is a technical area, and one in which the rules applied in the US and the UK are relevantly different. No doubt the appropriate professional bodies will be looking at these questions. Another set of issues relates to rules and practice governing the appointment of auditors, and the extent and nature of non-audit work carried out by firms' auditors.
Nonetheless, I hope to be able to give you some fresh insights into Switzerland’s position in the European framework. I shall first give you a brief overview of the present economic situation in Switzerland and then talk more specifically about our relationship with our neighbour countries. As you know, Switzerland is not a member of the European Union. But it is by no means an island or an isolated place in the Alps. Second, I should like to focus on Switzerland as a financial centre located in the heart of the continent and the challenges it currently faces. Finally, I shall outline the Swiss National Bank’s monetary policy and what degree of freedom it has in a country fully surrounded by the euro zone. This question is particularly relevant, since progressive globalisation and Switzerland’s close economic links with Europe regularly raise the question whether pursuing an autonomous monetary policy is still appropriate. Let me begin with the current economic situation in Switzerland. 2. The economic situation in brief  In Switzerland, as elsewhere, the boom of the late nineties has been followed by a prolonged period of stagnation accompanied by rising unemployment. Not only was last year disappointing, but 2003 also began badly. Given the sluggish economic development, especially in Europe, we have been forced to gradually downgrade our forecasts. On the exchange market, the strength of the Swiss franc has been an additional factor creating further difficulties for our export sector.