Monetary policy conditions Our investment policy differs in a number of ways from that of other large investors, whether they be private sector investors or sovereign wealth funds. This is due to the SNB’s special role. As an independent central bank, the SNB conducts Switzerland’s monetary policy. Our investment policy is always subordinated to monetary policy and can only be understood in the context of this policy, which is currently shaped by the minimum exchange rate of CHF 1.20 against the euro. We introduced the minimum exchange rate in September 2011, and since then we have enforced it consistently. You will recall how, at the time, the debt crisis in the euro area was threatening to deteriorate. The upward pressure on the Swiss franc was immense. For the SNB, it was important to ensure price stability and avert serious damage to the Swiss economy. Seen from the current perspective, this was certainly achieved. Two and a half years after its introduction, the minimum exchange rate remains a key element in the SNB’s monetary policy, and just last week, at our monetary policy assessment, we decided that it should be maintained. Although the recovery of the global economy continued in the fourth quarter of 2013, substantial risks remain. In addition, the conditional inflation forecast for Switzerland has been adjusted downwards in comparison to December. Internationally declining inflation rates and the slightly stronger Swiss franc are delaying the rise of inflation into positive territory.
History of investment policy at the SNB At the SNB, the move towards a sustainable investment policy aimed at optimising risk and return began as early as the 1970s. At that time, the management of foreign exchange reserves focused exclusively on the highest possible level of security and liquidity. Imagine a situation whereby, until 1978, a residual term of only three months was a legal requirement. As a result, foreign exchange reserves consisted primarily of short-term US dollar investments, particularly US treasury bills. This led to considerable concentration risk. At the same time, the potential return was extremely low. Despite narrow statutory provisions and market-related limitations, the SNB tried to make use of the existing room for manoeuvre as regards returns. However, it was not until after the partial revision of the NBA in 1997 that strategic importance was attached to the generation of returns. This became possible because of the abolition of the maximum residual term of one year for foreign exchange reserves, which had applied until then. A further important step towards a sustainable investment policy was the entry into force of the fully revised NBA in 2004. Although, at the time, the changes to investment policy did not attract much public attention, they were very important for the SNB’s investment activities. Within the monetary mandate, investment policy was defined as one of the SNB’s core tasks for the first time. Moreover, most statutory restrictions with regard to investment instruments were removed.