The Swiss franc remains significantly overvalued. The financial sector has also suffered from the effects of the recent crisis on Switzerland and its currency. For instance, the current account shows that exports of banking commissions have diminished markedly since the financial crisis. Indeed, the entire Swiss economy has had to adapt to new international monetary conditions. At the SNB we have geared monetary policy towards this new and difficult situation. 6  Swiss Bankers Association, Banking Barometer, September 2015. 7  BIS Triennial Central Bank Survey 2013. 8  Full-time equivalents. 9  Cf. Final report of the group of experts for the further development of the financial market strategy, dated 1.12.2014; Annex to the Review of the Swiss TBTF regime by international standards – Basis for an evaluation in accordance with Article 52 of the Banking Act, p. 55. 4  BIS central bankers’ speeches  Monetary policy during the financial and European debt crises The Swiss economy is currently being hit by external shocks. In such a context, the SNB aims to dampen short-term costs without jeopardising the long-term goals of monetary policy. The challenge for monetary policy in recent years has been to react to sudden developments in international markets and geopolitical risks that have endangered Switzerland’s real economy and price stability in the medium term. The goal has been to steer policy responses in a way that reduces short-term costs while preserving the stability achieved over the past four decades of independent monetary policy.
The link to the dollar has meant China adopting the same monetary policy as the United States, a policy which is undoubtedly too expansionary for the domestic conditions of an emerging economy. But it has also meant that large amounts of international reserves were invested back into the US financial market, in particular in government bonds, thus affecting that market. The same phenomenon occurred among oilexporting countries, which accumulated substantial dollar reserves over this period. Looking ahead, if we want to avoid a renewed accumulation of global imbalances, systemically important countries such as China must equip themselves with their own monetary policy and must allow the exchange rate of their currency to fluctuate on the basis of relative competitiveness, avoiding the systematic accumulation of international reserves. This requires coordination at the international level. Since 2003, the G7 has exerted pressure, in particular on China, to reduce the accumulation of international reserves and to adopt a more flexible exchange rate system. Since mid-2005, China has announced the progressive decoupling of the yuan from the dollar. In the first two years, the yuan appreciated by 21.5% vis-à-vis the dollar. But the appreciation came to a halt in July 2008. The accumulation of international reserves continued, reaching around USD 2,000 billion in March this year. Now that the dollar has depreciated slightly, the problem of pegging the Chinese currency to that of the United States returns with force.