The independence of the Swiss National Bank

Philipp Hildebrand, Chairman of the Governing Board

Avenir Suisse, Zurich, 21.06.2011

In the financial crisis, many central banks found themselves obliged to resort to unconventional measures. Consequently it is no surprise that a debate has started about the independence of monetary policymakers. However, independence is only a means to an end. That end is defined in art. 5 of Switzerland's National Bank Act as pursuing a monetary policy that serves the interests of the country as a whole while ensuring price stability. Theory and practical experience throughout the world are clear on this point. The more independent a central bank, the better it fulfils its mandate. Since monetary policy takes effect with a considerable time lag, central bankers must be credible. Independence is a necessary prerequisite for a central bank to develop this credibility. The independence granted to the Swiss National Bank (SNB) is particularly important for the Swiss economy because monetary policy has to bear the main burden of adjustment when shocks occur. However, this independence does not apply absolutely, but only with regard to the statutory mandate. Moreover, it is not unconditional. It goes hand in hand with the SNB's accountability to the Federal Council and parliament, and the requirement to provide the public with regular information. The cantons are also included through the Bank Council and through shareholdings. Transparency and accountability are crucial, particularly in times of crisis, when public information requirements increase exponentially. A latent threat to the independence of central banks exists at all times. Although it was right to work closely with governments during the recent crisis, this could give rise to false expectations amongst politicians. What is important is that central bankers focus on their monetary policy mandate. In order to fulfil its mandate in the interests of the country as a whole, the SNB will continue to use the instruments it judges best suited to this purpose.