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SNB Monetary Assessment June 2013: Very risk-averse, nearly hawkish tone

The most interesting macro questions in the Q&A session


On the counter-cyclical capital buffer:

Jordan: We think that the counter-cyclical capital buffer (CCCB)  is a good strategy. With this new instruments we should be very prudent. Currently the requirements are 1% more capital for banks. For the case that this is not sufficient, we may demand that the percentage is raised.

Danthine: Some people seem to doubt the effectiveness of the CCCB. The aim is to raise the resilience of banks and this aim will be certainly achieved in September.  The impact of the CCCB on the market dynamism is still unknown. We have market data from the first trimester of 2013, at a moment when the CCCB was just announced. We need to wait a bit to see the effects of the CCCB.

Jordan: We expect that banks become more risk-averse. We give the macro guidelines, the FINMA (the financial control authority) speaks with the concerned banks.

Danthine: We are looking for a soft-landing, we do not want a drastic change of banks’ behaviour.

Question (Le Temps, Geneva): The interest rate risk: there is a mismatch between financing and investments for certain banks, especially in the case of higher interest rates.

Danthine: The financing source of banks could change. Currently the banks consider that the funds of financing remain very stable.  However, savers could change their behaviour very quickly when interest rates rise.

Question (Sonntagszeitung, Zürich): If risks get higher, then are there other measures that could enforce the resilience of banks?

Danthine: Other measure could come from the FINMA. They could regulate and control more the banks. We have left the last crisis very easily, now it is our aim to avoid another crisis.

Question: When do inflation rates rise again? Is this a movement that will happen earlier in America?

Jordan: I can and will not give an answer when rates will rise.  Typically countries that are earlier in the business cycle, normalize their monetary policy first. These are currently the Americans, while many Europeans are still in a recession.

Question: What is the effect on Switzerland of potential negative interest rates that the ECB is currently discussing?

Jordan: I cannot comment what the ECB currently does or what it will do. I can only answer indirectly: We do not exclude any instrument to maintain the right monetary conditions. These conditions are certainly dependent on decisions taken in other currency areas like in the euro zone.

 Question: On the credibility of the risk-weighted assets calculation, done by the banks themselves.

Jordan: The banks have a natural interest in justifying their models. They have come into great critique by markets, regulators and media.

Question: How is the communication when central banks normalize policy. How will you remove the minimum exchange rate? Will remove it overnight or will you elaborate a communication strategy?

Jordan: The exit is so far away, that we have not thought about it yet. Therefore I cannot answer the question more than I just did.

Question: Where is the fair value of the Swiss franc? Is it still overvalued of current 1.23 levels?

Jordan: We still think that the franc is a highly valued currency. We do not give concrete information about the exact fair value. We expect that franc devalues over the time.

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George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.
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1 comment


    Very interesting analysis. Perfectly fits my expectations given the SNB’s current monetary creation drive.

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