The last few years have been challenging times for Hong Kong and for the banks that operate within it. So far 2003 has shown no signs of being an exception to this. Indeed, the environment in the first half of the year has been more than usually turbulent. Attention at the beginning of the year was focussed on geopolitical uncertainties, and in particular on the implications of the war in Iraq for both the global and the local economy. No sooner had concerns eased on this score - for the time being at least - than we were confronted with the escalating impact of the SARS epidemic. Hong Kong banks are used to dealing with unexpected shocks, but the threat of disease is something new in modern times. The immediate need for the banks was to keep their business going and to protect the health of their customers and staff. Business continuity plans were therefore activated, including the setting up of command centres to monitor the situation and the formation of plans to deal with confirmed or suspected cases of infection among staff. Critical to this process was the creation of back-up teams of staff who could man key operations in an emergency from separate offices or even from home. Face-to-face meetings among staff and with customers or clients had to be curtailed. Teleconferencing helped to keep things going, including in the syndicated loan market. The need for such arrangements demonstrated that banks must be able to react quickly and flexibly to unexpected situations.
Philipp M Hildebrand: Asset management at central banks - a special case? Speech by Mr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, at the University of St Gallen, St Gallen, 5 December 2003. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  Summary Next to monetary policy, the management of international reserves is another important task of the Swiss National Bank (SNB). Since its obligations cannot be defined precisely, there can be no exact determination as to the optimal level of a country’s international reserves. In accordance with the buffer stock model, the level of international reserves should be determined - just as one would choose an appropriate insurance - based on the likelihood of a crisis, on their contribution to managing or avoiding the crisis as well as on the opportunity costs implied in holding reserves. Both the insights derived from this model and from international comparison have shown that Switzerland holds a reasonable level of international reserves. The long-term development of these reserves should be based on a set of clear goals, as is the case in Switzerland with the growth of nominal GDP as a strategic benchmark. In defining its investment policy, the SNB takes into account safety, liquidity, and performance. The new National Bank Law will enable the SNB to better adapt its investment profile to its needs, which ought to lower the opportunity costs implied in holding reserves.