In the worst case scenario, it is even conceivable that the funds needed to provide such support would exceed our country’s financial resources. The lion’s share of the burden from the measures taken to stabilise the Swiss financial centre was borne by the SNB. For this reason, it has been a staunch advocate of addressing and remedying the “too big to fail” issue. The SNB has always stressed the need for a political decision in this regard. In November 2009, the Federal Council appointed a commission of experts, whose mandate is to formulate possible approaches for resolving the “too big to fail” issue. The SNB is represented by its Vice President, Thomas Jordan. The commission published its interim report last week. The report proposes measures in the areas of capital, liquidity, risk diversification and organisational structure. These measures are designed, first, to be preventative, reducing the likelihood of failure by a systemically important institution. Second, they should minimise the cost to the economy as a whole, in the event that a failure nevertheless occurs. The aim is to remove the need for renewed state intervention in the event of a crisis. The report by the commission of experts represents an important milestone in the “too big to fail” debate. The SNB supports the direction proposed by the commission. It shares the commission’s view that it is necessary to establish a legal basis which will allow special requirements to be imposed on systemically important banks.
In addition, it has discontinued its purchases of Swiss franc bonds issued by private sector borrowers. Indeed, movements in the Swiss franc against the euro over the past few months have caused monetary conditions to tighten somewhat. Yet, overall, monetary policy is still expansionary. The three-month Libor remains at a low-water mark of 0.25%, and we continue to supply the banks with generous amounts of liquidity. Let me now turn to the outlook for 2010 and the monetary policy challenges ahead. IV. Outlook for 2010  The global economy has been in a phase of recovery since mid-2009. The SNB expects that this will continue, although the recovery is still exposed to risks and will vary greatly from region to region. BIS Review 59/2010  3  The greatest expansion will be seen in emerging Asia. The entire region will, in particular, benefit from the strong growth in Chinese domestic demand. In the industrialised economies, the recovery is still being driven by the expansionary monetary and fiscal policy measures adopted at the start of the crisis. At the same time, there are a number of factors weighing on growth prospects. High unemployment, growing sovereign debt and the deterioration in household wealth are likely to dampen private consumer spending in many economies. In addition, given the underutilisation of capacity and the tighter lending conditions, corporate investment seems unlikely to stage a strong recovery. Moreover, in a number of countries the situation in the real estate market, and hence the outlook for the construction industry, will remain difficult.