Article 9 of the new NBL defines a wider scope of possible transactions. This allows the National Bank to further optimise the structure of its investments with a view to specific central bank needs. As part of this process, we are also evaluating the possibility of enlarging the investment universe. However, such an extension would raise a number of fundamental questions that will first need to be examined. Before the new law enters into force, we will establish and publish investment policy directives setting out how the Governing Board plans to make use of the extended investment policy scope. While our assets have already been managed largely in conformity with the principles of modern asset management, improvements were nevertheless called for. It was essential to bring our internal investment and risk control processes into line with the new legal framework. The opportunities for diversification brought about by additional investment instruments would, in principle, reduce the market risk of the investments. At the same time, though, the SNB would incur new risks, e.g. additional credit risks. In addition, corporate governance is to be enhanced. The primary goal is to segregate powers as far as possible: firstly between monetary policy and investment policy operations, secondly between investment strategy and its implementation through asset management, and thirdly between risk taking and risk controlling. There are limits to the principle of segregation of powers insofar as the Governing Board is responsible both for monetary policy and investment policy.
Philipp Hildebrand: The Swiss National Bank’s view of international financial markets against the background of trends in the United States Introductory remarks by Philipp Hildebrand, Member of the Governing Board of the Swiss National Bank, at the end-of-year media news conference, Zurich, 12 December 2003. *  *  *  The past year was a turbulent one for the international financial markets, which were essentially influenced by trends in the US. During the first half of 2003, market developments were shaped by economic and deflation fears as well as by the war in Iraq. In this environment, equity markets reached an annual low in March. In June, bond market yields fell to their lowest level. The second half of the year saw an economic recovery in the US, which is now spreading to other economic regions as well. Capital markets Long-term yields on Swiss paper rose by approximately 60 basis points from their low in June to roughly 2.7%, approximately tracking yields in the euro area. In both cases, yields followed the US market very closely, albeit with modest fluctuations (see graph 1). Under the present economic conditions, the interest rate environment in Switzerland is still viewed as attractive by consumers. The high level of new fixed-rate mortgages is an indication of this sentiment. The higher Swiss yields reflect the improved economic outlook and not inflation expectations, which are modest given that there is still pronounced underutilisation of capacities. In contrast to capital market yields, money market yields were decidedly stable.