Page 2/8  Monetary policy  With a view to ensuring appropriate monetary conditions, we are continuing to pursue our expansionary monetary policy. This is based on the negative interest rate that banks and other financial market participants are charged on their sight deposits at the SNB and on our continued willingness to intervene in the foreign exchange market as necessary. Both instruments remain essential as the situation is still fragile. While the foreign exchange market has largely shrugged off recent equity market turbulence, circumstances in the financial markets – and thus by extension monetary conditions for the economy – could rapidly deteriorate again. Such a development would be undesirable in the current environment. Inflation is now within the range that the SNB equates with price stability, and capacity utilisation in the economy has continued to improve. Nevertheless, inflation remains low and inflationary pressure is modest despite our expansionary monetary policy. Tightening monetary conditions would be premature at this juncture, and would risk unnecessarily jeopardising the positive economic momentum that has been established. The Swiss economy picked up markedly last year against a positive global economic backdrop. However, we should not let ourselves get carried away. Despite the easing on the foreign exchange market in the past twelve months, both short-term (cyclical) and longer-term (structural) challenges remain. Competition with other business locations around the world remains as intense now as it was prior to the crisis.
We are convinced that our banks are better able to withstand a crisis today than they were ten years ago. What is more, banks’ management bodies and the supervisory authorities alike now have a better understanding of how to assess risks. The comprehensive implementation of the agreed measures will further improve the stability of our financial system. We will still have systemically important banks in the future. However, these must no longer be too big to fail; that is to say, the state and taxpayers must no longer have to fear being held hostage. The new banking regulations therefore contribute to reducing risks, but they also take into account both the considerable economic importance of Switzerland’s banking sector and our interest in having a significant financial centre. I would like to cross over here, if I may, to the sovereign money initiative. The authors of this initiative hope that, if adopted, it would result in a more stable financial system. However, switching to an untested sovereign money regime would radically transform Switzerland’s tried-and-tested financial framework. Given the lack of empirical data and comparable systems worldwide, such a transformation risks plunging Switzerland into a period of great  11  From the end of 2019, both of Switzerland’s big banks must have a Leverage Ratio of at least 5.0% and an RWA Ratio of at least 14.3% on a going-concern basis, excluding the countercyclical capital buffer. Added to this are the gone-concern requirements in the same amounts (without taking any reductions into account).