By contrast, the outstanding volume in SNB USD Bills – launched in February 2009 to refinance the SNB loan to the StabFund – is already at USD 15 billion. In addition to these short-term financing operations, the SNB concluded long-term deposit transactions amounting to USD 4 billion. We plan to further reduce the use of the swap facility with the Federal Reserve. Risks The risks facing the SNB as a result of its commitment in the StabFund are substantial, yet owing to the bank’s strong balance sheet, these risks can be absorbed. I would particularly like to emphasise that the SNB’s commitment is actually considerably lower than the USD 60 billion which still gets quoted by the public quite often. The SNB does not consider its loan to the stabilisation fund as a hindrance – either to its risk capability or its monetary policy latitude. The unconventional measures also pose additional risks to the SNB’s balance sheet in the form of interest rate, currency and credit risks. However, our analyses show that, in terms of the consolidated balance sheet, these risks are relatively low. BIS Review 77/2009  3  The SNB is well aware of the fact that the unconventional monetary policy measures pose not only balance sheet risks, but also a whole series of other risks, including the difficulties connected with correctly assessing the monetary policy impact and with finding the best way to phase out the unconventional measures.
Financial System Risks in the UK – Issues and Challenges (John Gieve) (July 2006) www.bankofengland.co.uk/publications/speeches/2006/speech280.pdf . BIS Review 81/2007  1  To deliver these objectives effectively, the aim is also to use a rigorous and consistent analytical framework which integrates behavioural responses, interactions and feedback effects, to ensure that the system-wide implications are fully captured 5 So where is current practice against that ideal? A typical or traditional “macro” stress test has the stylised form set out in Chart A. The first stage is to put together a coherent stress scenario, typically using a macro-econometric model (which may include some assumed endogenous policy response). By mapping important propagation channels, an estimate of likely financial sector credit losses is produced; for example, by modelling the impact of the macro stress on corporate and household balance sheets and gauging the consequent impact on the probability of default and likely recovery rate on banks’ credit exposures. Market losses are estimated by judging the impact of the macro stress on different asset classes. Total bank losses are calculated by aggregating credit and market losses, perhaps including an additional allowance for the impact of the stress scenario on net interest income and on funding costs.