As is now well known, the EU authorities came up with a “shock and awe” package10 that, after some hesitations, market participants accepted as providing some reassurance, although not a complete and final solution to the European periphery debt problem. By the end of May, the pressures on the franc started to subside. Taking stock of these developments and of the visible strengthening of the recovery of the Swiss and global economies, the SNB considered in its June monetary assessment that the threat of deflation had largely disappeared. A further appreciation of the Swiss franc was no longer such a threat to price stability and the economy as it had been previously. In the second half of the year the SNB thus refrained from carrying out further interventions on the foreign exchange market. One can summarise this historical episode as follows. From March 2009 to the end of the year the SNB decided, in view of providing the most appropriate monetary conditions to an economy in recession, and given that traditional monetary policy had hit the zero lower bound, that it would prevent any appreciation of the Swiss franc against the euro. It maintained this policy stance until the MPA of December 2009. As Chart 7 shows, the nominal export weighted value of the Swiss franc which had appreciated by more than 10% since August 2007 was halted.
Unfortunately, one can see that the authorities in many countries have insufficient resources, independence and competence to match the often financially strong and rich in expertise financial institutions, whose owners can moreover all too easily gain the support of politicians against the supervisory authority’s demands for measures. This is of course a more serious weakness in a problem situation where a lack of measures, insufficient measures or delayed measures can aggravate the crisis. Another problem, although fortunately one we do not have in the Nordic countries, is harassment of the management and personnel within the public authorities for the purpose of reducing their ability and willingness to take supervisory measures against wrongdoing banks. In addition, it is important to establish clear roles and areas of responsibility between public authorities within the same country, between authorities in different countries and also between the authorities and the financial institutions. I have seen that in some countries it is unclear which authority makes the decisions, or which authority has the power to decide on a particular issue, because the law is unclear or because it is not followed in practice. This lack of clarity is accentuated in a crisis situation and hampers crisis management. This can be expressed in different ways, such as poor coordination between the authorities with regard to public statements and decisions or territorial conflicts arising and special interests being favoured over general solutions.