10 They must also put measures in place to ensure that they will remain able to act in the event of a crisis and that the bank can be restructured or wound down in an orderly fashion. This second set of measures thus reduces the risks stemming from systemically important banks in that it strengthens the crisis resilience of such institutions while also enabling a restructuring or orderly wind-down. 5 6  7  8  9  10  The ratio of capital to total assets is known as the Leverage Ratio. The financial crisis showed that it is not only the amount of capital that is important, but also its quality. Basel III therefore also raised capital quality requirements. In particular, the regulation ensures that eligible capital can already be used to absorb losses before insolvency proceedings are initiated. This is the only way that such capital can act as a buffer and counter the threat of the bank having to cease operations. The international regulatory framework has also put in place further measures to reduce systemic risks in the banking sector. For example, the risk of contagion within the banking sector is to be reduced through more consistent measurement and control of concentrations of exposure to specific counterparties (e.g. other banks). The procyclicality of regulation is also addressed – in phases of excessive lending the regulator can set a countercyclical capital buffer. This increases the capital requirements for banks during upswings, releasing the capital again in downturns.
Together these measures will strengthen the resilience of the banking sector, which can surely only benefit our economy and enhance our prosperity. Allow me to conclude by taking this opportunity, also on behalf of my Governing Board colleagues, Fritz Zurbrügg and Andréa Maechler, to thank our employees for their hard work and dedication. We also thank you, our shareholders, for your loyalty to the SNB and your faithful support. Let me also thank our young guests from Gymnase intercantonal de la Broye in Payerne and Kantonsschule Schüpfheim in Canton Lucerne for their interest in monetary policy and the SNB. Thank you all for your attention. Page 8/8