The distrust characterising interbank relations encouraged certain institutions to stockpile capital. This trend was reinforced by the fact that numerous banks were unable to make a reliable estimate of their own liquidity requirements, particularly in view of the soaring demand for cash on the part of the public. At the end of last year, the total value of banknotes in circulation had risen by 11% and banks had three times as much money on their SNB sight deposit accounts as at the end of 2007. To satisfy this extraordinary demand, the SNB was obliged to expand its repo operations in terms of volume and maturity, and to inject liquidity into the market through a new channel – that of swap transactions. Over the past few years, repos have become the standard tool with which we implement our monetary policy. They involve loans to banks denominated in Swiss francs and backed by securities. As a rule, these loans are granted for a term of one week. However, in response to the special needs of the market in 2008, we had to lengthen the term of our loans on several occasions, extending maturity to as much as twelve months. Unlike other central banks, however, we saw no need to expand the range of eligible securities, since we already apply a very liberal policy, accepting top-rated securities denominated not only in Swiss francs, but also in euros, pounds sterling, US dollars and other currencies. In 2008, the average amount of our repos rose by 53% against the year before.
Ladies and Gentlemen, our country needs professionals with high levels of social and moral awareness so that all of us are aware of the moral obligations and potential impact of our thinking, decisions and actions. We need to be good role models for others in behaviour, attitude and relationships. Let us endeavour to act in a way that is professional and that retains the confidence of the public at all times. I thank you for your attention. 2  BIS Review 159/2009