SNB to open repo market to non-banks

In an effort to maintain a liquid currency, the Swiss National Bank will invite non-bank financial institutions in Switzerland and Liechtenstein to participate in the repo market from 2010. Initial candidates are likely to be insurance companies with significant treasury activities in Swiss francs, and managers of Swiss franc money market funds. “In this way we plan to further promote the secured money market and increase the stability and crisis resistance of the financial system,” said Thomas Jordan, member of the SNB governing board.

A number of other significant announcements emerged in Zurich today, at the SNB’s end-of-year news conference. Jean-Pierre Roth, chairman, said the SNB “will continue to act decisively to prevent any excessive appreciation of the Swiss franc against the euro” because an appreciation of the Swiss franc against the euro would run counter to the relaxation in monetary conditions. He was quite upbeat, however, saying the phase of tightening lending conditions could be coming to an end.

Philipp Hildebrand, vice-chairman, said that the concept of “too big to fail” contradicted the principle of market economy and could not be tolerated. He also said that Swiss risk measures would need to be tougher than the international standard, because of the importance of banking to the Swiss economy. With risk in mind, he said the SNB supported the shift from OTC to exchange-cleared derivatives.