As regards Swiss bank regulations, it is primarily the risks emanating from developments in the real estate and mortgage markets which are presently the focus of public interest. However, the most decisive factor for the long-term importance of the Swiss banking centre is the alleviation of the TBTF issue. Only if this can be done, will it be possible to provide a home to international banks in Switzerland in the long term. Thus, regulatory efforts to contain the TBTF issue convincingly in Switzerland are extremely important. With the Swiss TBTF legislation, which is currently being implemented, we are making good progress in this respect. The package of legislation rests on two pillars. First, systemically important banks are subject to significantly higher capital and liquidity requirements with a progressive component. Second, arrangements must be made to ensure that systemically important banks are resolvable in a crisis, so that it is not necessary to resort to public funds. If these measures are implemented in full, incentives to take on excessive risk will be substantially reduced. This will diminish the likelihood of a crisis, as well as the costs to the taxpayer, should a crisis nevertheless occur. At the same time, the measures help to strengthen domestic competition, because they reduce the implicit subsidies to the TBTF banks. However, we have not yet achieved our objective.
This was demonstrated in the real estate crisis at the beginning of the 1990s and again in the most recent financial crisis. In the 1990s, the big banks were able to absorb at least part of the impact of the regional banking crisis on the economy, while during the financial crisis, the domestically focused banks, which were hardly affected, ensured that lending operations in Switzerland continued almost unimpeded. In addition, the following prerequisites must, in my view, be fulfilled, in order that the Swiss banking centre can retain its global importance and reach. The quality of the services offered by the banks, their crisis resilience and their reputations must all be considerably above average. Although, in principle, quality, crisis resilience and reputation are important for any financial centre, they are particularly crucial for Switzerland. On the one hand, our comparatively small country can only afford to host a relatively large international banking centre if this financial centre is extremely stable since, naturally, the resources available for emergency bank rescues are limited. On the other, an irreproachable reputation makes a major contribution to ensuring that the business operations of Swiss banks are not subject to constant political and legal pressure from abroad. And, again, excellence in service quality and products offered is essential if banks from a small country are to export their services successfully and secure significant market shares for themselves in international competition for customers. It is above all the banks themselves who face the challenge of fulfilling these prerequisites.