Monetary Policy Implementation in the Crisis the Swiss Case

8/10/2019 Monetary Policy Implementation in the Crisis the Swiss Case

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in the Crisis: The Swiss CaseJean-Pierre Danthine

Swiss National Bank

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tion

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European Central Bank Workshop

Frankfurt am Main, 10 October 2011

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1

Outstanding Open Market Operations

isis

Crisis Post-Crisis 1

P

ost

Pre-

Cr

-Crisis

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tion

ase

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Source: SNB


3/23

2

The SNBs Monetary Policy Framework

Ultimate objectivePrice stability

Main indicatorInflation forecast

-

nta

tion

ase

Reverse Re o

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Swaps

SNB BillsInstruments

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inthe

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FX interventions


4/23


5/23

4

CHF 3M-Libor and SNB Repo Rate

4.00

Crisis: unconventionalPre-Crisis: conventional%

3.50

2.50

.Target range

2.00CHF 3M-Libor

nta

tion

ase

1.00

.

SNB repo rate

(absorbing)

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0.00

0.50

SNB repo rate

MonetaryP

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Crisi

Jan 04 Jan 06 Jan 08 Jan 10

Source: SNB


6/23

Assessment of the Policy Rate5

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Source:

Amstad,

Martin,

Monetary

Policy

Implementation:

Common

Goals

but

Different

Practices,

FRBNY

Current

Issue,

Volume

17


7/23

6

From Liquidity Deficit to Liquidity Surplus

Liquidity providing(pre-crisis)

Liquidity absorbing(crisis & post-crisis 1)

Surplus

ase

SNB Bills

FXpurc

h

nta

tion

ase

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Neutral sight deposits Repo operations0

MonetaryP

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DeficitRepo operations


8/23

Post-Crisis 2: Minimum Exchange Rate7

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ase

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9/23

Post-Crisis 2: Measures in August 20118

3 August 2011

. .

zero

Increasin the su l of li uidit to the Swiss franc mone market

Increasing Banks sight deposits from CHF 30 bn to CHF 80 bn

Suspendin li uidit -absorbin OMOs

Repurchasing outstanding SNB Bills 10 August 2011

nta

tion

ase

Increasing banks sight deposits at the SNB to CHF 120 bn

Reintroducing foreign exchange swaps

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17 August 2011

Further increasing banks sight deposits at the SNB to CHF 200 bn

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Repo operations to provide liquidity at negative rates


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9

First Measures Against the Strong Swiss Franc

s epos urc asesFX Swaps Cash Provider Repos

Sight deposits of domestic banks Total sight depositsCHF bn

250

300

250

300

150

200

150

200

50

100

50

100

nta

tion

ase

-5 0

0

-50

0

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- 1 5 0

- 1 0 0

-150

-100

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inthe

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Source: SNB

04 Jul 11 18 Jul 11 01 Aug 11 15 Aug 11 29 Aug 11


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10

Negative 3M Libor Futures

Before

2Today

nta

tion

ase

3

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12/23

11

Quasi-Zero CHF 3M Libor

Before

2

3 Toda

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tion

ase

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12

CHF Nominal Effective Exchange Rate

1 2 3 4

ntation

ase

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13

CHF Still Overvalued

Today

ntation

ase

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15/23

Monetary Policy Implementation: Key Issues14

Operational target (ON vs. long-term rate)

Instruments (Repo, FX-Swaps, Bills)

Auction framework

Range of eligible collateral (narrow vs. broad)

Infrastructure

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ase

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16/23

Currencies of SNB Repo Eligible Collateral15

CHF EUR USD GBP DKK SEK NOK

3.1%

1.8%0.7%

.

17.1%

2.8%

ntation

ase

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Source: SNB


17/23

Underlying Currency of Delivered Collateral16

CHF DKK EUR GBP NOK SEK USD

0.8%0.4%

3.6% 1.3%

34.6%

.13.7%

24.8%

ntation

ase

37.1%

56.2%

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Source: SIX SIS AG

1. Quarter 2009 2. Quarter 2011


18/23




Auction framework


e o coun erpar es omes c an s an s rom a roa

Infrastructure

ntation

ase

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19/23

18

SNBs Repo Operations

CHF bn

Banks domiciled in Switzerland Banks domiciled abroad

80

40

20

ntation

ase

-

0

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-40

Monet

aryP

inthe

Crisi

Source: SNB

Jan 07 Oct 07 Jul 08 Apr 09 Jan 10 Oct 10 Jul 11


20/23




Auction framework


e o coun erpar es omes c an s an s rom a roa

Infrastructure

ntation

ase

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21/23

20

Swiss Value Chain: Highly Standardized

Cash ProviderCash Taker

TP)

Eurex RepoElectronic Trading Platform

Non-Anonymous

essing(

ughPr

oc

SIX SIS Ltd.ICSDSecurity Transfer

s)

nt

ation

ase

gh

tThro

a y s managemen

eryversu

e

nt(DvP

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Strai

SIX InterbankClearing

Deli

Pay

MonetaryP

inthe

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Money Transfer


22/23

21

Since 2005 No Fails in Margin Calls

1012'000Margin Security Transfer Margin Cash Transfer Margin Transfer Fails (rhs)# #

8

9

10'000

6

78'000

45

'

6'000

nt

ation

ase

2

3

2'000

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0

1

0

MonetaryP

inthe

Crisi

Source: SIX SIS AGNote: SNB and interbank repo transactions

2005 2006 2007 2008 2009 2010


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22

Copyright , limitation of liability

Copyright

The Swiss National Bank (SNB) respects all third-party rights, in particular rights relating to worksrotected b co ri ht information or data, wordin s and de ictions, to the extent the are of an

individual character).

SNB publications containing a reference to a copyright ( Swiss National Bank/SNB, Zurich/year, or similar)

may only be used under copyright law (reproduced, used via the internet, etc.) for non-commercial.

with the prior express consent of the SNB.

In addition, the SNB provides information and data from its own sources as well as certain processed data

from outside sources. Such information and processed data may be used, translated (with reference to the, , - ,

such information or data.

Limitation of liability

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ation

ase

The SNB accepts no responsibility for any information it provides. Under no circumstances will it accept any

liability for losses or damage which may result from the use of such information. This limitation of liabilityapplies, in particular, to the topicality, accuracy, validity and availability of the information.

olicyImplem

s:TheSwissC

,available by the SNB is admissible. To the extent that the data is clearly derived from outside sources, the

users of such data are obliged to respect any existing copyrights and to obtain the right of use from therelevant outside source themselves.

MonetaryP

inthe

Crisi

Swiss National Bank, Zurich 2010

Monetary Policy Implementation in the Crisis the Swiss Case

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