Andréa M Maechler: How negative interest works and changes in the management of foreign exchange reserves Speech by Ms Andréa M Maechler, Member of the Governing Board of the Swiss National Bank, at the Media News Conference of the Swiss National Bank, Berne, 10 December 2015. *  *  *  Accompanying charts can be found at the end of the speech. In my remarks today, I will begin by talking about developments on financial markets since the middle of the year. Then I will discuss the way in which negative interest works. I will conclude with a report on changes in the way we manage our currency reserves. Situation on the financial markets I will start with the situation on the financial markets. Financial market developments since the middle of the year have mainly been shaped by three topics: the uncertainty surrounding the first interest rate move by the Federal Reserve, monetary policy easing measures by the European Central Bank (ECB) and concerns about growth prospects in the emerging economies, particularly China. In mid-August, disappointing economic data and an unexpected depreciation of the renminbi against the US dollar resulted in a sharp decline in the Chinese stock market. The fallout was also felt by stock markets of other emerging and advanced economies in short succession. After volatility on the stock markets had increased sharply at times, investors’ appetite for risk gradually returned at the end of September. Favourable economic data from the US and the euro area contributed to the more positive sentiment.
Lastly, private bankers must also bear in mind that there is a very wide range of sophistication and investment experience among private banking clients from Mainland China. So private banks must ensure that their account managers take extra care in offering investment advice and marketing investment products to the less sophisticated clients. Ladies and gentlemen, private banking is just a special type of banking: it is all about trust and service. It takes a private bank many, many decades to build up trust, but such trust can be destroyed overnight. My vision, which I am sure is shared by many of you, is that Hong Kong will become the most competitive and dynamic private banking hub in the region in the years to come. This is a highly achievable aspiration if both the industry and the regulators work closely together to develop, nurture and protect the reputation of the private banking industry as well as the professionalism and ethical standards of its practitioners. Thank you very much. BIS central bankers’ speeches  5