In slide 3, it is denoted by the light blue area.2 Our foreign currency purchases also lead to an increase in Swiss franc liquidity, i.e. a rise in the monetary base, which is reflected on the liabilities side of the balance sheet in the bank sight deposits item. In the chart this can be seen as a red area. Thus, the SNB’s foreign exchange reserves do not represent equity, or ‘true’ assets since they are offset by liabilities. They have come about through money creation as part of measures required for monetary policy purposes. Consequently, they should be at the disposal of monetary policy at all times. For instance, when capital flows normalise sustainably, we can assume that the SNB balance sheet total can be reduced again in the long term. However, the level of SNB foreign currency investments will remain high for as long as required by monetary policy. If necessary and reasonable from a monetary policy point of view and if the benefits exceed the costs, the SNB will further expand its balance sheet in future and accept the associated risks. Modern and professional asset management at the SNB This brings me to my second question: how does the SNB handle its foreign currency investments? The short answer is that the SNB manages its foreign currency investments professionally and cost effectively. The SNB began to set up its modern asset management structure relatively early.
Unicredit Group can probably be qualified as the quintessential European cross-border banking group, with operations in 22 European countries and, amongst these 22, in 19 Central and Eastern European countries. Alessandro is also the President of the European Banking Association. The last 2 to 3 years have been especially eventful for financial integration and stability, with once in a life-time developments. After Lehman Brothers filed for bankruptcy in September 2008, the global financial system experienced unprecedented stress and policy makers had to tread unknown territory in dealing with it. BIS Review 47/2010  1  The financial crisis has raised a host of policy issues that will provide food for reflection for generations to come. I will mention a few of them to set the scene and to kick-start the discussion. The first set of issues relate to the developments in the late nineties and early 2000s. The combination of high economic growth, ample liquidity, increasing financial integration and development, and “light handed” regulation sewed the seeds of the crisis to come. I believe that a number of people and organisations, including mine, identified vulnerabilities in the financial system before the crisis erupted. Nevertheless, we did not anticipate the timing and the intensity. We should ask ourselves what we missed in the run-up to the crisis and what the lessons are for the future. Once the crisis erupted in full force, a first casualty were the money markets, which provide the oil to make the banking system run smoothly. Money markets came to an unprecedented stand-still.