Reform proposals for the SNB - expectations and reality
Jean Studer, President of the Bank Council
108th Ordinary General Meeting of Shareholders of the Swiss National Bank, Berne, 29.04.2016
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In Switzerland, as in other countries, the shocks suffered in the financial crisis have unleashed a broad-based debate on the role of central banks, and many ideas for reform have emerged from this. Intensive discussion about the monetary order is a good sign for a society. Exchanging opinions in this way can help bring about a better understanding of monetary policy. For Switzerland, with its direct democracy, it is particularly important, because voters are frequently called upon to decide on these sorts of matters. Consequently, the Swiss National Bank (SNB) informs the general public comprehensively about monetary policy and the currency order, and also makes statements on reform proposals. In doing so, it helps achieve solutions that are as appropriate as possible.
One of these proposals foresees an extension of the SNB's statutory mandate. Alongside the goal of price stability, the advocates believe that new goals such as full employment and exchange rate stability should be prescribed by law. However, this would only build up hopes which were impossible for the SNB to fulfil in reality. Furthermore, the SNB is already committed to conducting monetary policy in the interests of the country as a whole. In doing so, it has to make difficult trade-offs in which employment and the exchange rate are major variables. Sometimes, conflicts can arise between the goals of price stability, currency stability and full employment. At these times it is particularly important that the SNB's mandate embodies a clear and unambiguous goal - price stability.
A second proposal concerns the provision of a better basis for monetary policy decisions. The idea is to achieve this by enlarging the Governing Board. However, the foundation for monetary policy decisions is already broad-based since they include many different assessments. The small size of the Governing Board facilitates productive discussions. With an enlargement of the board, interest groups might be tempted to place their 'people' on it which could 'politicise' the body.
How can the SNB's thoughts and actions be made even more transparent? A third proposal argues that one way this can be achieved is by publishing the minutes of Governing Board meetings on monetary policy decisions. However, the Governing Board already provides the general public with detailed explanations of the analyses and considerations behind its decisions. Moreover, publishing the minutes would have a detrimental effect on free and open discussion within the body. In addition, such a publication would run counter to the culture of collegiality as it is understood and practised in many executive bodies in this country.
Monetary history shows us that there is no ideal monetary order for all times, and that adjustments can be necessary. Care must be taken in doing so, however, since a central bank must be the embodiment of stability. Therefore, reform ideas with high expectations must measure up to reality, and reality is often harsh.