Mr. Meyer addresses the competitiveness of financial centres from a Swiss perspective Address by the Chairman of the Governing Board of the Swiss National Bank, Mr. Hans Meyer, at the International Bankers Club Luxembourg, held in Luxembourg on 23/3/98. Both Luxembourg and Switzerland are major financial centres in Europe. The performance and competitiveness of the financial services industry are thus of key economic and social importance to both countries. I should like to use this opportunity to say a few words on the subject from what may be a somewhat unusual perspective. The factors which determine the competitiveness of an industry are basically the same as those determining the success of the entire economy. In both cases, we are looking at a multitude of quite diverse factors with varying degrees of importance. Today, I would like to single out just three of them which I believe are of particular significance: economic stability, social equilibrium (i.e. political stability), and the human factor. Although each of these elements could be dealt with separately, they should ultimately be viewed in a broader context. Let’s start with economic stability. I define this as a state of balanced development across the economy as a whole, characterised by steady growth, a modest inflation rate and low unemployment. One of the main prerequisites for achieving such a state is the ability not only to create but to sustain an appropriate economic framework. This is primarily an objective for monetary policy, fiscal policy and competition policy.
I have already spoken about the general prerequisites needed for a financial market to flourish. Within the scope defined by the operating conditions mentioned, market players are basically responsible themselves for what they do or don’t do. Their prime concern is to stay solvent at all times by adopting sound business practices and putting an effective organisation in place. To prevent problems from occurring, the responsible bodies at the individual banks must be able at all times, and with a minimum of delay, to accurately assess their risk situation and to take rapid and appropriate action. Of course, it is never possible to rule out the possibility of an individual bank running into difficulties. In such cases, a solution must first be sought through the market. Solidarity among the other market players should provide a “first line of defence”. Seeking funds from the central bank can only be contemplated in the last instance - hence the expression “lender of last resort”. Obtaining credit from the central bank presupposes that the liquidity requirements are only temporary. If the solvency of a BIS Review 26/1998  -4bank is in peril because of a threat to its capital, the problem is a matter for the supervisory authorities and possibly for the state itself. In practice, the boundary between liquidity and solvency problems can be a fluid one. In my view, it is important for everyone involved not to lose sight of these principles which are in fact quite simple.