7 Furthermore, Governing Board members have appeared on numerous occasions before parliament committees, on public panels, as well as in print and electronic media, to explain significant monetary policy measures, such as the UBS bail-out, as well as the introduction and discontinuation of the minimum exchange rate. However, transparency is not a goal in itself, but rather a means to achieve accountability, and it has its limits. It cannot be allowed to hamper the implementation or the effectiveness of monetary policy. An obvious example here is the discontinuation of the minimum exchange rate, when it was impossible for the SNB to give any kind of advanced warning of this decision without triggering speculative attacks on the EUR/CHF exchange rate. In short, it is a fiction that the SNB has unlimited power. It is a fact that Switzerland has a well-developed system of checks and balances obliging the SNB to transparently account for its decisions. Fiction IV: Financial stability is an impossible dream With this, let me turn to another field in which the SNB has taken on a more prominent role recently, namely, financial stability. Substantial efforts are underway to improve the regulation of the financial system, both globally and nationally. Sometimes, these efforts are greeted with scepticism, based on the view – or the fiction – that financial stability is an “impossible dream”. While I accept that there are conceptual and practical difficulties in fostering the stability of the financial system, I do not share this pessimism.
A case in point is the SNB’s decision to introduce the minimum exchange rate of CHF 1.20 per euro in September 2011, and then discontinue it earlier this year. As mentioned, in enforcing the minimum exchange rate, the SNB intervened heavily in the foreign exchange markets, and did not refrain from taking on significant balance sheet risks, particularly in 2012. At the time, interventions were necessary to counteract upward pressure on the Swiss franc resulting from substantial capital inflows and a lack of outflows due to flare-ups in the European debt crisis. Towards the end of 2014, the minimum exchange rate again came under increasing market pressure, requiring renewed interventions by the SNB. This time, however, the international environment was very different. While expectations of an interest rate rise in the United States were mounting and the dollar was appreciating, from mid-year onwards there were signs in the euro area of further monetary policy easing, and the euro started to weaken across the board, pushing the EUR/CHF exchange rate close to the CHF 1.20 per euro floor. On the back of these developments – also reflecting the collapsing interest rate differential – Swiss franc investments again became relatively more attractive. Given these circumstances, and in view of quantitative easing in the euro area, the continuation of the minimum exchange rate policy would have meant a permanent, potentially uncontrollable expansion of the SNB balance sheet.