Banking System of Swiss

SHIFAT-E-ISLAM
ID: 2112437147
The Swiss National Bank is Switzerland's central bank. It has the exclusive
right to issue banknotes and has been mandated to conduct the
country's monetary policy. In accordance with the constitution
and swiss law,

* The SNB is dependent in the fulfilment of its mandate,

* holds regular discussion with the Federal council,
* is accountable to the Federal Assembly and
* is obliged to provide the general public with regular information on its
activities.
History of the SNB In the 19th century,there were several cantonal and
private banks in Switzerland which issued banknotes in competition with one
another. As the swiss economy was growing rapidly,it was reflected in
particular by an inadequate supply of banknotes. Calls for the creation of a
central bank in 1891, an article was added to the constitution stating that the
right to issue banknotes was the preserve of the confederation alone.
Another 15 years were to pass before the Federal act on the SNB entered
into force in early January 1906, as prior to that,swiss voters had rejected a
proposal to establish a state bank. In june 1907, the swiss National Bank
assumed its function as an independent central bank.
At the time of the SNB's foundation,the monetary order in most of the world
was based on the fixed relationship between currencies and gold. In this
context,the SNB'S mandate was to regulate the circulation of money and
facilitate payment transactions. It was obliged to provide gold on demand in
exchange for banknotes.
MONIKA AZAM SARA
ID: 2112037148
The global economy has changed considerably since then. Gold no longer
plays the role of anchor in the international monetary system, and the
significance of banknotes has decreased in comparison to book money (bank
account balances). What has remained unchanged, however, is the SNB's
responsibility to conduct its monetary policy in a way that keeps the value of
money stable and enables the economy to prosper.
Monetary policy strategy Price stability is an Important prerequisite for
growth and prosperity. Inflation (a sustained increase in the price level) and
deflation (a sustained decrease in the price level) both impair economic
activity. The monetary policy strategy consists of the following three
elements: *a definition of price stability, *a conditional inflation forecast
over the subsequent three years, and *the SNB policy rate.
Definition of price stability The SNB equates price stability with a rise in the
Swiss consumer price index of less than 2% per annum.
Deflation also breaches the objective of price stability. With its definition of
price stability, the SNB takes into account the fact that it cannot handle
inflation precisely and that the consumer price index tends to overstate
Inflation slightly.
RITA AKTER
ID: 2112237149
Conditional inflation forecast: The forecast, which relates to the three
subsequent years reflect the medium term focus of monetary policy. With
this approach, the SNB takes account of fact that output and prices react to
monetary policy stimuil with at time considerable - lages.
Besides the inflation forecast, the SNB takes into consideration a large
number of indicator of domestic and international economic and Monetary
development and of financial stability for its monetary policy decisions. The
SNB's inflation forecast is based on the assumption that the SNB policy rate
communicated at the time of publication will remain constant over the
forecast horizon.
It is therefore a conditional forecast that shows how the SNB expects
consumer prices to move, assuming no change in monetary policy. This
enables tha public ta gauge or measure the future need for action in
monetary policy.
SNB policy rate Tha Swiss National Bank sets tha level of the SNB policy rate
and uses it to communicate its monetary policy decisions. It seeks to keep
the secured short - term money market rates close to the SNB policy rate.
The focus is on the Swiss Average Overnight ( SARON) as the most
representive of the short -term Swiss franc rates.
MD. MAHABBAT ALI
ID: 2110637151
Other elements:
• Influencing the interest rate environment:
Monetary policy influences interest rates in the economy – like interest rates for housing loans, business
loans and interest rates on savings accounts. Changes in interest rates influence people's decisions to
invest or consume, which ultimately affects economic growth, employment and inflation.
The SNB ensures price stability by using its monetary policy operations to influence the interest rate
environment and aling it with the prevailing economic situation.
Lowering real interest rates generally tends to have a stimulating effect on demand and on prices of
goods and services, while raising them tends to have a dampening effect.
The average interest rate across all Swiss savings accounts for adults is currently 0.8 percent. But the
actual annual interest rates at individual banks range between 0 and 2 percent. Taking a moment to
compare savings accounts is worth it . (Nov 10, 2023)
Role of exchange rate
• A country's monetary policy is closely linked to its exchange rate
regime. A country's interest rates affect the value of its currency, so
those with a fixed exchange rate will have less scope for an
independent monetary policy than ones with a flexible exchange rate.
It therefore tends to appreciate in such phases, which has an impact
on inflation and the economy.
• The SNB maintains price stability by ensuring appropriate monetary
conditions. This means keeping interest rates and the exchange rate
aligned to the prevailing economic situation.
Unconventional mesures
• In general, unconventional measures can be defined as those policies that
directly target the cost and availability of external finance to banks,
households and non-financial companies. These sources of finance can be
in the form of central bank liquidity, loans, fixed-income securities or
equity
When interest rates are at very low levels, this increasingly narrows the
scope for further interest rate reduction.
The most important unconventional measures taken by the SNB in recent
year have been foreign exchange market interventions and the introduction
of negative interest on deposits held by banks at the SNB.
After cutting interest rates to historically low levels, the SNB decided earlier
this year to extend the length of repo transactions to a year and started to
buy bonds denominated in Swiss francs.
The central bank has also repeatedly intervened on the currency
markets to prevent the franc from rising too much against the euro.
The Swiss central bank has been able to "protect the Swiss market from
a generalized rise in credit spreads".
MD. SHUVO MIA
ID: 2111037152
Amplementation of monetary policy The SNB.can influence money market
rates by means of its open market operations or adjust the interest rate on
sight deposits held by banks and other financial market participants at the
SNB.
In order to influence monetary conditions, the SNB also intervenes in the
foreign exchange market, as necessary. Since 2015, the SNB has been
implementing monetary policy via the negative interest rate (i.e. the interest
rate on sight deposits held by banks and other financial market participants
at the SNB), and foreign exchange market interventions.
Sight deposits at the SNB Sight deposits at the SNB are a bank's most liquid
assets. They are readily available for payment transactions and are
considered legal tender. Banks also hold sight deposits as a liquidity reserve
and in order to fulfil statutory minimum reserve requirements. Any
deployment of monetary policy instruments by the SNB also has an influence
on sight deposits. The minimum reserve requirement on banks, ensures that
banks hold a minimum amount of base money.
Access to monetary policy operations In principle all banks in Switzerland are
admissible as counterparties in SNB monetary policy operations. Other
domestic financial market participants such as insurance companies, as well
as foreign banks, may be admitted to monetary policy operations
REYAD KHAN
ID: 2111037153
MD. SADIK KAWSAR
ID: 2110637154
1. Repo transactions n the case of liquidity-providing repo transactions, the
SN purchases securities from a bank (or another institution) and credits
the equal to the latter's sight deposit account.) At the same time, it is
agreed that the SNB will sell securities of the same type and quantity
back to the bank at a later date. In the case of a liquidity-absorbing repo,
the transactions are conducted in the opposite direction. For the term of
the repo agreement, the cash taker generally pays interest (the repo rate)
to the cash provider.
SNB Bills The SNB can absorb liquidity by issuing its own debt certificates in
Swiss francs (SNB Bills). Maturities can be up to one year. To increase
liquidity, the SNB can repurchase SNB Bills via the secondary market.
SNB COVID-19 refinancing facility In March 2020, the Swiss National Bank set
up the SNB COVID-19 refinancing facility (CRF). The CRF is aimed at
strengthening the supply of credit to the economy and ensuring high liquidity
in the banking system. It is designed to cushion the economic impact of the
coronavirus pandemic.
The facility allows banks to obtain liquidity from the SNB in the form of a
secured loan by assigning credit claims from corporate loans as collateral.
The SNB can also accept other collateral to cover the loans it grants.
MD. SABBIR HOSSEN SOHAG
ID: 2110337155
Payment system. and system manager of the Swiss interbank clearing (SIC) It
fulfils this duty primarily by serving as commissioning party of cashless
payment systems. The SNB has the task of facilitating and securing the
operation The SNB's role in the cashless payment system
SIC system The SIC system is the central payment system in Switzerland for
payments in Swiss francs. Via the SIC system, banks and other financial
market participants settle both their interbank payments (payments between
financial institutions as well as third-party system payments) and retall
payments. he latter are mainly initiated by payment instruments such as
bank transters and direct debits. The SNB also uses the SIC system to provide
the Swiss franc money market with liquidity.
legally, the two accounts form one unit with the SNB and a settlement
account in the siC system - Technically speaking, a participant holds a sight
deposit account SIC system.
Accounts at the SNB are used as the means of payment in the The deposits
held by SIC participants in their sight deposit Payments in the SIC system are
settled in central bank money. irrevocably and with finality. individually, This
means that payment orders are executed continuously, The Sic system is a
real-time gross settlement system.
MD. HABIB MOLLA
ID: 2111037156
Independence, Accountability and relationship with the Confederation Legal
basis of independence : The SNB's independence is enshrined in the Federal
Construction. It entails various aspects, which are set out in detail in the
National Bank Act.
This functional independence prohibits the SNB and its bodies from
accepting instructions issued by the Federal Council, the Federal Assembly or
any other body in fulfilling its monetary policy tasks. Its financial
independence is evident both in the SNB's budgetary autonomy resulting
from its legal status as a special-statute joint stock company, and in the
prohibition from granting loans to the Confederation.
Direct state access to the banknote printing press is thus blocked. The SNB's
institutional independence is indicated by the fact that it is an independent
legal entity with an organisation of itsown.
Finally, the independence of the SNB in personnel issues is reflected by the
fact that members of the Governing Board and their deputies may be
removed from office during their fixed term only if they no longer fulfil the
requirements for exercising their office or have committed a service offence.
MYKEL KANTI SHIL
ID: 2110737157
Accountability and provision of information: As a counterbalance to its
independence, the SNB is accountable to the Federal Council, the Federal
Assembly and the general public and is obliged to provide them with
information (art. 7 NBA). The SNB reviews the economic situation and
monetary policy with the Federal Council and discusses issues relating to the
government's economic policies. Furthermore, the SNB draws up an annual
written report - the accountability report - for the Federal Assembly on how
it has fulfilled its statutory tasks, and explains its monetary policy to the
relevant committees.
The SNB keeps the general public informed of its activities by means of press
releases, news conferences and speeches, as well as regular publications on
its monetary policy, such as the Quarterly Bulletin. By explaining its policy
and rendering account of its decisions and their consequences, the SNB
makes its activities transparent.
Cooperation with and supervision by the Confederation: As the SNB performs
a public function, it is administered with the cooperation of the
Confederation and is under its supervision. Thus, the Federal Council
appoints the majority of the Bank Council members, including the President
and the Vice President, as well as the members and deputy members of the
Governing Board, on the recommendation of the Bank Council.
In this way, the Swiss government ensures that the SNB is managed
effectively and efficiently. Banker to the Confederation: The SNB also acts as
the Confederation's bank. It keeps sight deposit accounts in Swiss francs and
foreign currencies for the Confederation. In addition, it provides technical
and advisory assistance in connection with the issuance of Confederation
bonds and money market debt register claims. Furthermore, the SNB acts as
the payment office for coupons and repayments of Confederation bonds.
Finally, it manages the Confederation's securities custody accounts and
conducts money market and foreign exchange transactions.