The decision adopted by the monetary authority of Switzerland took into account the fact that the floor – implemented in September 2011, when the Swiss franc was substantially overvalued against the euro – had become increasingly difficult to keep in place given the quantitative easing initiated by the European Central Bank and the significant capital inflows into Switzerland. The CHF appreciation against the leu was inevitable, even if the domestic currency had a relatively stable evolution against the reference currency (euro). The literature refers to the Swiss franc as a safe haven currency. Owing to the small size of the local financial market, against the background of foreign capital inflows, the Swiss franc tends to strengthen significantly versus other currencies in times of turmoil on international markets. The measures the National Bank of Romania can take in order to influence the exchange rate of the domestic currency against the Swiss franc are limited. The CHF/RON exchange rate is set indirectly. The euro is Romania’s reference currency on the FX market, given the intensity of the country’s trade with euro area states, the EU membership and Romania’s intention to adopt the euro in the future. The EUR/RON exchange rate is the result of the foreign currency demand and supply generated by trade and financial flows, while the CHF/RON exchange rate is determined indirectly depending on the EUR/RON and EUR/CHF exchange rates.
We can only achieve this if the case for financial stability is well understood. There is a very clear parallel here with monetary policy. The success of monetary policy is founded on public acceptance of the benefits of sustained low inflation. That did not come easily, as the experiences of the 1970s taught. But once that public acceptance and interest started to become embedded, the task of monetary policy became easier – not easy, but easier. In this important sense, no such policy making apparatus can be independent of the will and interest of the public. And nor is the task of ensuring public acceptance ever finished. Monetary policy has demonstrated that a firmly established and lasting institutional framework for policy making is a necessity. But exactly what is the public interest in financial stability? This can be a harder question to answer than for monetary policy, because financial stability cannot be so readily summarised in a statistical series. There is a temptation to generalise that you certainly know it when it isn’t there. I think there are at least four things that the public should want as part of the overall stability of the financial system. First, that they can have confidence in the safety and soundness of the institutions that hold their money and savings and write policies to protect  BIS Review 121/2010  1  them against risks. Second, that those institutions have the capacity to undertake the stable and sound provision of financial services to the economy, including of course lending.