The share of banks reporting a further slight tightening of conditions for corporate lending has fallen considerably, from 40% at the time of the previous quarterly survey to 3% for this quarter. Households appear to be benefiting from a similar trend, as no banks have announced a tightening of their lending conditions for households,  2  BIS Review 167/2009  whereas in the previous quarter 50% of banks reported a further slight tightening of lending conditions for non-mortgage loans and 20% for mortgage loans to households. The survey also suggests that demand for loans has stabilised. The share of banks experiencing increased household demand for mortgages has fallen from 40% at the beginning of this year to 10%. The situation in Switzerland is thus very different to that observed in other economies. Not only is there no credit crunch, but we have also witnessed a substantial increase in the volume of mortgages. There are also signs of a relaxation in lending conditions for mortgage loans. We would like to sound a note of caution, both to banks and to firms and households, as regards the risks inherent in a relaxation of discipline in real estate financing. Inflation outlook Monetary policy influences the medium and long-term inflation outlook. By contrast, it has very little effect on short-term developments. The past two years have been a perfect illustration of this. Inflation peaked at 3.1% in July 2008, before plummeting to –1.2% in July this year.
Long-term relationships with customers are being replaced by more transient transactions with counterparties. •  Raghuram Rajan observes how increasing product complexity and reliance on technology has created a detachment from the customer. •  It ultimately leads to a reductionist view of finance where “money is the measure of all worth”, a state that is hardly conducive for ethical conduct. 3  Second, compensation structures tend to over-emphasise profits as performance measures. Excessive focus on sales targets and commissions has incentivised a “trading mentality” which is often associated with too much risk taking or scant regard for client interests or the sustainability of relationships. Third, and more fundamentally, departures from ethical conduct are too easily tolerated as the norm. 2  Mark Carney, “The Future of Financial Regulation”, MAS Lecture, Singapore, 2014. 3  Raghuram Rajan, “Where Money is the Measure of All Worth” in Fault Lines: How Hidden Fractures Still Threaten the World Economy, 2010. 2  BIS central bankers’ speeches  •  In a global survey of financial sector executives by the Economist Intelligence Unit, more than half the respondents felt that their career progression would be difficult without being “flexible on ethical standards”. •  If you look at the email and chat room messages between traders involved in the rigging of financial benchmarks, they betray a lack of any sense of guilt or wrongdoing. •  In fact, traders were congratulating and complimenting each other on their manipulation.