A stable financial system
Financial stability is a key prerequisite for the functioning of a national economy and for the effective implementation of monetary policy. A stable financial system can be defined as a system whose individual components – financial intermediaries and the financial market infrastructure – fulfil their respective functions and prove resistant to potential shocks.
The SNB mandate
Under the National Bank Act, the SNB has the task to contribute to the stability of the financial system. Moreover, the Act assigns the oversight of systemically importantfinancial market infrastructuresto the SNB.
In the field of financial stability the SNB cooperates with the Swiss Financial Market Supervisory Authority FINMA. A Memorandum of Understanding (MoU) contains a clear division of the individual responsibilities of the two institutions and regulations on their cooperation.
How the SNB promotes financial stability
Analysis and research: The SNB analyses the developments in the financial markets and in the area of financial market infrastructure. It pays special attention to the Swiss banking industry and the financial market infrastructures.
Promotion of an appropriate framework for the financial centre: At a national level, the SNB – in conjunction with the Confederation and the Swiss Financial Market Supervisory Authority (FINMA) – participates in reform projects (cf. relevant Confederation website: www.finweb.admin.ch). At an international level, it is permanently represented on the Basel Committee on Banking Supervision and on the Committee on Payments and Market Infrastructures (CPMI) of the Bank for International Settlements (BIS) (cf. BIS website: www.bis.org) and participates in various international task forces that deal with financial stability issues. A well-known example is the Financial Stability Board (FSB) (www.financialstabilityboard.org).
Liquidity assistance: The SNB acts as lender of last resort (LoLR). In this function, it can – under certain conditions – provide liquidity assistance against collateral if domestic banks are no longer able to refinance their operations in the market (cf. Guidelines on Monetary Policy Instruments).
Oversight: The SNB is responsible for overseeing financial market infrastructures, focusing primarily on systems that are of importance to the stability of the Swiss financial system. The supervision of Switzerland’s banking sector is the responsibility of the Swiss Financial Market Supervisory Authority (FINMA) (www.finma.ch).