In a system of flexible exchange rates, gold is no longer required for it to perform this function and the gold initiative is therefore unnecessary. Price stability and the stability of the Swiss franc are not determined by the share of gold in the SNB’s balance sheet, but by its monetary policy. It has achieved these goals more effectively than virtually any other central bank: average inflation has remained below 1% for the last 20 years, and never in the history of the SNB has there been such a sustained period of low and stable inflation. Prescriptions on the share of gold in the balance sheet, coupled with a sales ban, would make it considerably more difficult for the SNB to fulfil its mandate in future. For this reason, the gold initiative is harmful. In order to pursue a stability-oriented monetary policy, the SNB needs to be able to supply the Swiss economy with Swiss franc liquidity quickly in periods of crisis. The SNB’s balance sheet expands when liquidity is increased. In the aftermath of a crisis, it is critical that this newly injected liquidity be reduced again, in order to prevent an undesirable rise in inflation. Scaling back liquidity, on the other hand, reduces the balance sheet total. Given that the initiative is calling for gold to make up at least 20% of the SNB’s assets, a temporary liquidity increase would require gold holdings to be increased, too.
Asia Bond Monitor. Includes bonds issued by governments, regional authorities, supranational organisations and corporations. 3  BIS. 2013. Triennial Central Bank Survey, Foreign Exchange Turnover in April 2013: Preliminary global results. 2  BIS central bankers’ speeches  broadest possible diversification of our investments is extremely important. Consequently, we have increased our exposure in this region over the last few years, in particular to Japan, Australia, Singapore and Korea. Since 2010, the share of Asian currencies in our foreign exchange reserves has almost doubled, from just under 6% to almost 12%. Prior to the financial crisis, the SNB had less than CHF 5 billion invested in Asian assets – and these investments were denominated exclusively in yen. Since 2010, we have been investing in the Australian and Singapore dollars, and since 2012, in the Korean won as well. At the end of 2013, we had over CHF 50 billion invested in Asia, and of this, CHF 15 billion was invested in these three new currencies (left-hand side of slide 4).4 Today, 3.5% of the SNB’s total foreign exchange reserves are allocated to these currencies (right-hand side of slide 4). We see further potential in Asia as we move forward and it will not surprise you to hear that we see China playing an increasingly important role here. Investment quota for Chinese government bonds Why does China interest us?