Speech  Embargo 31 October 2019, 4.30 pm  Challenges confronting the pension system – options and limitations of monetary policy PK-Netz conference  Thomas J. Jordan∗ Chairman of the Governing Board Swiss National Bank Berne, 31 October 2019 © Swiss National Bank, Zurich, 2019 (speech given in German)  ∗  The speaker would like to thank Nicolas Cuche-Curti, Peter Kuster and Inske Pirschel for their support in drafting this speech. He also thanks Claudia Aebersold Szalay, Simone Auer, Carlos Lenz, Susanne Mühlemann and Alexander Perruchoud as well as SNB Language Services. Page 1/8  Ladies and gentlemen I am delighted to be able to talk to you at this important event. It gives me the opportunity to explain our position in what is a difficult financial market environment for you especially as pension fund managers. The Swiss National Bank (SNB) is responsible for our country’s monetary policy and not for its social policies, nor for its pension schemes. At the same time, however, it is important for us as the central bank that the occupational pension system should be able to fulfil its constitutional mandate: together with Pillar 1 – the Old Age and Survivors’ Insurance scheme (AHV) – it is required to ensure that insured persons can maintain their previous lifestyle in an appropriate manner after retirement. Solid funding is crucial for this, as a pension system must be financially sound if the population is to have confidence in it.
This showed that the negative interest rate, and our willingness to intervene on the foreign exchange market as necessary, are still essential in order to ease pressure on the franc, thereby stabilising price developments and supporting economic activity. Only in this way can we fulfil our mandate – to ensure price stability while taking due account of economic developments – in the interests of the country as a whole. In September, we also adjusted the basis for calculating the exemption threshold, which defines the portion of a bank’s sight deposits at the SNB on which we do not charge negative interest. This adjustment reduces the overall burden imposed on the banking system by negative interest to the minimum required for monetary policy purposes, 6 while taking account of the possibility that the low interest rate environment may persist worldwide for some time to come. While negative interest rates are unusual and should only be temporary, moderately negative rates are not fundamentally different in terms of their economic effects from interest rates above zero. As the negative interest rate has brought about an easing of financing conditions in the economy, companies are able to take out loans for investments at lower cost. For us, however, this so-called ‘interest rate channel’ is not of prime importance. Rather, it is the effect on the exchange rate that is decisive for Switzerland as a small open economy. With the negative interest rate, we can ensure that the traditional interest rate differential versus other countries is not eroded excessively.