Price and financial stability - a demanding year for the SNB

Thomas Jordan, Chairman of the Governing Board

115th Ordinary General Meeting of Shareholders of the Swiss National Bank, Berne, 28.04.2023

We are living in extremely turbulent times. This year saw a shock to the Swiss financial sector, namely the crisis at Credit Suisse and the takeover of the bank by UBS. In addition to combating elevated inflation, which has preoccupied the Swiss National Bank for over a year now, the SNB made an important contribution to managing this latest crisis.

When increased price pressure became apparent in other countries during 2021, the SNB allowed the Swiss franc to appreciate in order to minimise the amount of inflation being imported into Switzerland. Thanks in part to this, inflation rose less strongly in this country. Nonetheless, prices went up more than we would have liked here, too, and it became clear that these rises were increasingly affecting a wide range of goods and services. In such situations, monetary policy must intervene decisively to prevent inflation from becoming entrenched above the range of price stability.

The SNB has therefore gradually tightened monetary policy since June 2022 by raising interest rates and selling foreign currency. The SNB policy rate is currently 1.5%, compared to -0.75% a year ago. Moreover, in net terms, the SNB sold foreign currency worth CHF 22.3 billion in 2022. At its most recent monetary policy assessment in March, the SNB emphasised that it would continue to tighten monetary policy if necessary.

While ensuring price stability is a task that the SNB can perform alone using its monetary policy instruments, several entities are involved in safeguarding financial stability. The SNB cooperates closely with FINMA and the federal government in this endeavour. If the stability of the financial system is under threat, the SNB provides emergency liquidity in the form of loans to illiquid banks that FINMA has classified as solvent. Doing so allows it to calm the situation and buy time in which to overcome a crisis. The Federal Council may ultimately use taxpayers' money to restore stability.

The collapse of Credit Suisse would have sent a shockwave through the global financial system and would have had dramatic consequences for the real economy. This extremely demanding situation required quick and decisive action. The federal government, FINMA and the SNB worked together under high-pressure conditions to find a solution that was viable and as market-based as possible in order to safeguard financial stability and protect the Swiss economy.

Once the takeover of Credit Suisse by UBS had been decided, the situation quickly stabilised. Now it is time to look ahead and think about options for the future.