Accountability report

Under the National Bank Act, the SNB is obliged to report to the Federal Assembly each year on the fulfilment of its statutory tasks. The accountability report describes the economic and monetary developments during the period under review and gives a detailed presentation of how the SNB fulfilled its tasks. The accountability report is part of the SNB's Annual Report.

Annual Report

The SNB's Annual Report comprises the accountability report and the financial report.


Bank Council

The Bank Council oversees and controls the conduct of business by the SNB, in particular as regards compliance with legislation, regulations and directives, but not regarding monetary policy decisions and monetary policy actions of the Governing Board. Of the eleven Bank Council members, five are elected by the General Meeting of SNB shareholders and six by the Federal Council, which also appoints the President and Vice President of the Bank Council. The Bank Council has a Compensation Committee, a Nomination Committee, an Audit Committee and a Risk Committee.

Banker to the Confederation

In accordance with the National Bank Act, the SNB may provide banking services to the Swiss Confederation for an adequate consideration. However, they are provided free of charge if they facilitate the implementation of monetary policy. The SNB may not grant the Confederation loans or overdraft facilities, nor is it permitted to buy new issues of government debt securities.

Bank for International Settlements (BIS)

The Bank for International Settlements (BIS) was founded in 1930 and has its headquarters in Basel. It promotes international monetary and financial cooperation. The central bank governors of the BIS members meet regularly for an exchange of information. The BIS maintains the secretariat for various committees and groups of experts, e.g. for the Basel Committee on Banking Supervision and the Financial Stability Board (FSB). As a bank for central banks, it manages the currency reserves of numerous countries and international financial institutions. Moreover, it grants bilateral monetary assistance loans and acts as counterparty for central banks in their financial transactions. The SNB has occupied one of the seats on the BIS Board of Directors since the BIS's foundation.

Banking Act

The aim of the Banking Act (Federal Act on Banks and Savings Banks) is to protect creditors and to strengthen the Swiss financial centre. It sets out rules on authorisation for the commencement of banking activities, on the banking activities themselves and on the presentation of accounts. It also stipulates that the audits required under banking law be conducted by private auditors and defines FINMA as being responsible for supervising the banks.

Banknote circulation

The sum of all banknotes issued by the SNB is referred to as banknote circulation. Notes in circulation, together with the sight deposits of domestic commercial banks held at the SNB, make up the monetary base. Banknotes in circulation represent a liability of the central bank vis-à-vis the public, and are thus shown on the liabilities side of the central bank's balance sheet.

Banknote series

A banknote series consists of different denominations, which are developed, designed and produced at the same time. Up to now, there have been nine banknote series in Switzerland. The notes of the first series were put into circulation in 1907 and were considered interim banknotes. Not all notes of the eight banknote series were actually brought into circulation. The fourth and seventh series were held as reserve series. Work on the ninth banknote series has been under way for several years now. The 50-franc note, the first denomination in the new series of Swiss banknotes, was issued on 12 April 2016. The remaining denominations will gradually be replaced up to 2019.

Basel Committee on Banking Supervision

The Basel Committee on Banking Supervision was established in 1974 by the Bank for International Settlements (BIS) in response to the collapse of Bank Herstatt in Germany, which was brought about by currency speculation. The Committee is made up of representatives of central banks and banking supervisory authorities from 27 countries. Switzerland is represented by FINMA and the SNB. The Basel Committee's main objectives are to promote the exchange of information between national supervisory authorities, to enhance supervisory techniques and to issue recommendations for regulatory minimum standards. The decisions and recommendations of the Basel Committee attract a great deal of attention worldwide. They are not binding, however, as the Committee does not exercise a supranational banking supervisory function. Particularly significant is the Basel Capital Adequacy Framework, also known as Basel I, Basel II and Basel III.

Basel III

The reforms by the Basel Committee on Banking Supervision, issued in 2010 (Basel III), include a further revision of the Basel Capital Adequacy Framework. In addition to stricter, risk-based capital requirements with a countercyclical effect, these new requirements set limits on leverage for the first time (leverage ratio). Basel III also specifies a global minimum liquidity standard. Basel III is to be implemented in Switzerland gradually from 2013 to 2018. An important trigger for Basel III was the global financial crisis that began in 2007.

Book money

Book money is a balance held in a bank or post office account. It is also known as sight balances or money in account.

Bretton Woods institutions

In summer 1944, representatives from 45 nations met in Bretton Woods, a small town in the US state of New Hampshire, for the United Nations Monetary and Financial Conference. The Bretton Woods conference led to the foundation of the International Monetary Fund (IMF) and the World Bank in 1945. The Bretton Woods institutions are specialised agencies of the UN. Switzerland has been a member of the two institutions since 1992.


Capital market

The capital market supplements the money market, and is a market for raising and investing medium to long-term funds. Medium-term loans are generally those with a term of one to four years, with anything beyond that considered long term. In this context, a distinction must be made between the stock market for equity capital, and the bond market, where debt certificates (bonds), i.e. borrowed capital, are issued and traded.


Cash is understood to mean banknotes and coins that can be used as legal tender.

Cash processing institution

Cash processing institutions are private companies that handle the sorting of banknotes and coins on behalf of third parties (banks, Swiss Post, retailers, small businesses, etc.). These companies subsequently hand over excess or damaged banknotes and coins to the SNB. They also participate in the distribution of banknotes and coins.

Central bank

A central bank is the monetary authority of a country. As a rule, it has the exclusive right to issue banknotes (note-issuing privilege) and conducts the country's monetary policy. Switzerland's central bank is the Swiss National Bank (SNB).


Clearing is the process of transmitting, reconciling, confirming and, in some cases, netting reciprocal obligations as well as calculating the final positions for settlement of a payment or securities transaction.

Consumer price index (CPI)

The national consumer price index (CPI), which is compiled by the Swiss Federal Statistical Office (FSO, www.bfs.admin.ch), measures the average development of prices for goods and services in demand by private households in Switzerland. The CPI is calculated every month based on a basket whose contents represent private household consumption. The CPI is used to measure the inflation rate in Switzerland. The SNB uses the CPI as a basis for its definition of price stability.

Countercyclical capital buffer

The countercyclical capital buffer is a preventative capital measure within the Basel III framework. It has been available in Switzerland since July 2012. If the capital buffer is activated, banks are required to carry out a temporary and gradual increase in their capital in the event of imbalances on the lending market. The aim is to protect the banking industry from the consequences of excessive lending growth by increasing banks' loss absorption capacity. Moreover, a capitalisation means that the costs of lending rise, and this counters the build-up of imbalances. The capital buffer may be activated for the entire credit market or just for one sector, for instance the mortgage market, and is set at a maximum level of 2.5% of the entire domestic risk-weighted assets of a bank. If the capital buffer is activated in Switzerland, it must be complied with by all Swiss banks as well as by the subsidiaries of foreign banks in Switzerland, in addition to all other capital requirements. If the SNB decides that an activation, adjustment or deactivation of the buffer is required, it makes a proposal to the Federal Council after consultation with FINMA. On 13 February 2013, the Federal Council decided to activate the countercyclical capital buffer for the first time, upon the proposal of the SNB (press release). On 22 January 2014, the Federal Council approved the SNB's proposal to increase the countercyclical capital buffer (press release).

Currency in circulation

Currency in circulation is made up of banknote circulation and coin circulation minus the cash holdings of banks.

Currency reserves

The SNB's currency reserves comprise its gold holdings, the foreign currency investments, the reserve position in the International Monetary Fund (IMF) and the international payment instruments.

Currency Treaty

The Principality of Liechtenstein has, by statute, introduced the Swiss franc as its legal tender. The Currency Treaty between the Swiss Confederation and the Principality of Liechtenstein governs the collaboration between the two countries with regard to the joint currency area.



Deflation is the opposite of inflation and denotes a continued decline in the general price level over a longer period. The deflation rate measures the percentage decrease of the price index. Inversely to inflation, deflation leads to a rise in the purchasing power of money. The aim of the SNB's monetary policy is to avoid both inflation and deflation and thus ensure price stability.


A banknote series consists of different denominations, each with a different nominal value. Both the current eighth banknote series and the ninth series that will gradually be phased in between 2016 and 2019 have six denominations: the 10, 20, 50, 100, 200 and 1000 franc notes.


The Swiss National Bank is divided into three departments. Each department has a specific area of business. Departments I and III are for the most part located in Zurich, while Department II is mainly located in Berne. The SNB also maintains a branch office in Singapore.

Deposit insurance

The Banking Act requires all Swiss branches of banks and securities dealers to insure preferential deposits using the depositor protection scheme guaranteed by Esisuisse (www.esisuisse.ch). If a bank or securities dealer in Switzerland becomes insolvent, other Esisuisse members will immediately provide the necessary funds, up to a total of CHF 6 billion. This solidarity arrangement ensures that the insolvent bank's customers will receive their insured deposits within one month. Deposits are insured up to a maximum total value of CHF 100,000 per depositor. Banks' contributions are reimbursed during the subsequent wind-down of the insolvent bank.

Distribution reserve

The distribution reserve serves as a buffer to help smooth the SNB's annual profit distribution to the Confederation and the cantons and forms part of the SNB's equity. While the SNB's annual profit is subject to considerable fluctuation, the National Bank Act and the profit distribution agreement between the Federal Department of Finance and the SNB provide for a smoothing of distributions over several years. The difference between distributable annual profit and actual distribution of profits is balanced out via the distribution reserve. However, the distribution reserve provides no guarantee that a distribution is possible in all cases.


Electronic money (e-money)

Electronic money, or e-money, describes electronically stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions, and which is accepted by a natural or legal person other than the electronic money issuer. This includes prepaid cards with multiple uses. E-money is an additional form of money alongside base money and commercial banks' book money.

Emergency liquidity assistance

Based on the National Bank Act, the SNB also functions as lender of last resort. Under the emergency liquidity assistance arrangements, it can provide domestic banks with liquidity if they are no longer able to refinance their operations on the market. Emergency liquidity assistance is provided only if the bank or group of banks seeking credit is of importance for the stability of the financial system and is solvent, and if the liquidity assistance is covered by sufficient collateral at all times. The SNB determines what collateral is sufficient. Apart from liquid bank assets, less liquid bank assets with high credit ratings may also serve as collateral, for instance, mortgage claims.


euroSIC is a real-time gross settlement system (RTGS) and is used for euro payment transactions between Swiss financial institutions. euroSIC, which is essentially a copy of the Swiss franc SIC system, settles euro payments through the accounts of SECB Swiss Euro Clearing Bank. euroSIC is operated by SIX Interbank Clearing Ltd. By virtue of SECB Swiss Euro Clearing Bank's access to TARGET2, euroSIC also facilitates the settlement of cross-border transactions in euros. Moreover, euroSIC is linked to the Swiss stock exchange (SIX Swiss Exchange) and the SECOM securities settlement system.

Exchange rate

The exchange rate designates the rate at which two currencies are exchanged. It is expressed as the price of one currency in units of another currency. Expressing the price of a foreign currency unit in domestic currency terms is called direct quotation (e.g. CHF 0.91 per USD), expressing a domestic currency unit in foreign currency terms is known as indirect quotation (e.g. USD 1.12 per CHF). The external value corresponds to the exchange rate expressed in the indirect quotation. Direct quotation is what is normally used in Switzerland. An exchange rate adjusted for price developments in the countries concerned is known as the real exchange rate. If the exchange rate is measured against a basket of foreign currencies, this is called an effective exchange rate.

Exchange rate index

An exchange rate index combines the external value of the domestic currency against the currencies of trading partners to a single measure. The currencies are weighted in accordance with the significance of the trading partner for the domestic economy (weighted effective exchange rate). The nominal exchange rate index measures a currency's nominal external value. If the domestic currency appreciates on average, the index rises. The real exchange rate index measures the real external value of the domestic currency. A rise in the index value indicates real-term appreciation of the domestic currency. This means real purchasing power increases on average.


Federal Act on Currency and Payment Instruments

The Federal Act on Currency and Payment Instruments defines the Swiss franc as Switzerland's currency, determines legal tender and governs banknote and coin matters.

Financial market infrastructure

The financial market infrastructure comprises all systems used to clear and settle financial market transactions. In Switzerland, this includes the interbank payment system SIC (Swiss Interbank Clearing) (operated by SIX Interbank Clearing Ltd on behalf of the SNB), the system for trading securities on the Swiss stock exchange (SIX Swiss Exchange), the SECOM securities settlement system (SIX SIS Ltd) and the central counterparty SIX x-clear (SIX x-clear Ltd). The operators have merged to form SIX Group Ltd. The SNB monitors the financial market infrastructure and can impose minimum requirements on the operators.

Financial stability

A stable financial system is understood to be a system whose individual components – banks, financial markets and financial market infrastructures – fulfil their individual functions and are resilient to potential shocks. Financial stability is an important prerequisite for economic development and effective monetary policy implementation. Under the National Bank Act, the SNB has the task of contributing to the stability of the financial system.

Financial Stability Board (FSB)

The Financial Stability Board (FSB) brings together representatives of national authorities responsible for financial stability (central banks, regulatory authorities and finance ministries). In 2009, the G20 gave the FSB a mandate to promote financial stability and formulate appropriate regulatory and oversight measures. Since then, it has developed a number of reform proposals, including those aimed at alleviating the 'too big to fail' issue. The SNB has been involved in these efforts. In January 2013, the FSB became an association under Swiss law.

Financial Stability Report

In its Financial Stability Report, which is published annually, the SNB presents its assessment of the stability of Switzerland's banking sector. For the SNB, the report is an important way to contribute to the stability of the financial system, and thereby fulfil its statutory mandate in this regard. The report highlights tensions or imbalances that might pose a threat to financial stability in the short or long term, and suggests appropriate action to deal with them.

FINMA (Financial Market Supervisory Authority)

FINMA (www.finma.ch), the Swiss Financial Market Supervisory Authority, is responsible for the supervision of banks, insurance companies, stock exchanges, securities dealers, collective capital schemes, distributors and insurance intermediaries. As an independent authority, it acts to protect creditors, investors and insured persons, and to ensure the proper functioning of financial markets.

Foreign currency investments

Foreign currency investments is the term used to describe the SNB's investments in the form of foreign bonds, shares and deposits at other central banks. Foreign currency investments are the most important asset in the SNB's balance sheet and form part of its currency reserves.

Foreign exchange

Foreign exchange comprises financial claims denominated in foreign currency and payable abroad. Examples are foreign sight and time deposits and cheques denominated in foreign currency.

Foreign exchange market

The foreign exchange market is where currencies are traded. These are traded over the counter (OTC), i.e. not on an exchange. As a consequence, the market is made up of various segments, defined either by type of participant (e.g. interbank market) or type of platform (e.g. electronic or telephone).

Foreign exchange market intervention

Foreign exchange market intervention occurs when a central bank buys or sells its domestic currency (spot or forward) for one or more foreign currencies with the goal of strengthening or weakening its own currency.

Foreign exchange swap

A foreign exchange swap is a combination of a spot transaction and a forward transaction with foreign currency. In a liquidity swap, the SNB buys foreign currency from commercial banks against Swiss francs for a fixed term and sells it to them, also for a fixed term. At the end of the term, the reverse transaction is carried out at a previously agreed exchange rate. Swaps can be drawn up with very flexible terms and conditions (Questions and answers on foreign exchange swaps).


General Meeting of SNB Shareholders

The SNB's annual General Meeting of Shareholders approves the SNB's business and financial report and determines the dividend. The General Meeting of Shareholders also appoints five of the eleven Bank Council members. As it is stipulated in the National Bank Act that the SNB is a joint-stock company, shareholder rights are limited. SNB shares are listed on the Swiss stock exchange.

Governing Board

The Governing Board is the supreme management and executive body of the SNB. It consists of three people: the Chairman, the Vice Chairman and one additional member. The Governing Board is, among other things, responsible for monetary policy, asset management strategy and international monetary cooperation. The Enlarged Governing Board is made up of the three Governing Board members and their deputies, and is responsible for the strategic guidelines for the SNB's business operations. The members of the Governing Board and their deputies are appointed for a term of office of six years by the Federal Council on the basis of a proposal by the Bank Council. Re-election is possible.

Gross domestic product (GDP)

The gross domestic product (GDP) is a measure of an economy's value added. It measures the value of domestically produced goods and domestically rendered services, insofar as they are not used as inputs for the production of other goods and services. In other words, it measures added value. The GDP is often used as a reference for a country's economic capacity. In Switzerland, the GDP is calculated by the Swiss Federal Statistical Office (FSO, www.bfs.admin.ch). The State Secretariat for Economic Affairs (SECO, www.seco.admin.ch) publishes a GDP estimate once every quarter. In connection with its monetary policy assessments, the SNB provides estimates of GDP developments for the current and the coming year.

Growth potential

In economics, the term growth potential is used to describe long-term change in gross domestic product (GDP) at a normal utilisation level of productive capacity. In other words, growth potential represents the change in potential output. An output gap arises when actual GDP falls below growth potential, i.e. capacity is underutilised. The opposite case is that of a production overhang, where capacity is overutilised.



The term hyperinflation designates an extremely high level of inflation, and is usually used when the monthly rate of inflation exceeds 50%. This corresponds to an annual inflation rate of 12875%.


Independence of the SNB

According to the Federal Constitution and the National Bank Act, the SNB has sole responsibility for monetary policy decision-making and may not seek or accept instructions from other authorities. This independence is intended to ensure that monetary policy is not subverted to short-term political interests. The more independent a central bank, the better it fulfils its mandate. Since monetary policy takes effect with a considerable time lag, central banks must be credible. Independence is a necessary prerequisite for a central bank to develop this credibility. It goes hand in hand with the SNB's accountability to the Federal Council and parliament (accountability report), and the requirement to provide the public with regular information (Questions and answers on the SNB's independence and its relationship with the Confederation).


Inflation is a sustained increase in the general price level which continues over a longer period of time, corresponding to a loss of the purchasing power of money. However, changes in the prices of individual products (goods and services) or groups of products which reflect a change in the relationship between market demand and supply are not synonymous with inflation. In Switzerland, inflation is measured using the national consumer price index (CPI). The rate of inflation expresses the percentage increase in this index. The target of the SNB's monetary policy is to avoid both inflation and deflation, and thereby to ensure price stability.

Interest, nominal

Interest is the return for making a sum of money available for a certain period. It is owed by the debtor to the creditor. Interest is expressed as a percentage of the sum made available (interest rate) and usually refers to a time period of one year. The interest rate evolves according to supply and demand in the money market and capital markets. Its level is also influenced by the duration for which the money is made available and the financial standing (creditworthiness and solvency) of the debtor.

Interest, real

An adjustment of the nominal interest rate for the loss of purchasing power due to inflation leads to the real interest rate. It is thus calculated as the difference between the nominal interest rate and the inflation rate. In other words, the real interest rate is the return on investments adjusted for inflation or the borrowing costs adjusted for inflation respectively.


Legal tender

According to the Federal Act on Currency and Payment Instruments, legal tender in Switzerland comprises coins issued by the federal government, banknotes issued by the SNB, and SNB sight deposits in Swiss francs. In general, legal tender must be unconditionally accepted as payment, unless contractual arrangements have been made to the contrary.

Leverage ratio

The leverage ratio measures the level of indebtedness of a bank (Basel III). It is the ratio of equity to the sum of all assets, although these are not risk-weighted. As a rule, the higher the leverage ratio, the more resilient the bank in a crisis.

Libor (London Interbank Offered Rate)

The Libor (London Interbank Offered Rate) refers to the average interest rate at which a bank can obtain unsecured loans for a certain term and in a certain currency. Shortly before 11 am on each bank business day, the banks concerned report an interest rate to the ICE Benchmark Administration, which is responsible for the calculation of the Libor. Participants in the relevant survey are the most important globally active banks, whose number can vary depending on the currency involved. The top and bottom quartiles of the reported rates are disregarded, and an average is calculated on the basis of the remaining interest rates. The figure obtained in this manner is fixed and published as the Libor for the day in question. The SNB used the three-month Swiss franc Libor as its reference interest rate until 13 June 2019. Against the background of international reform efforts in the area of reference interest rates, the UK's Financial Conduct Authority announced in July 2017 that it would no longer support the Libor after 2021. The National Working Group on Swiss Franc Reference Rates recommended SARON as the alternative to the Swiss franc Libor in Switzerland. Since 13 June 2019, the SNB has been focusing on SARON in seeking to keep the short-term Swiss franc money market rates close to the SNB policy rate.


Liquidity is defined as the ability to meet all claims that fall due, at any time and without restriction. Under the Banking Act, Swiss banks must ensure that they hold sufficient liquidity. Accordingly, a bank or group of banks is referred to as illiquid if it does not have sufficient liquid assets to meet all short-term claims. A bank can be solvent but nonetheless illiquid: while it may have sufficient assets to cover all debts and not be over-indebted, it may not have sufficient liquid assets to meet all short-term liabilities. To manage their liquidity, banks depend on the money market. By managing the liquidity on the money market, the SNB implements its monetary policy.

Loan-to-value ratio

The loan-to-value ratio is understood to mean the ratio between the mortgage loan and the value of the mortgaged property. The mortgage lending value is generally applied as the value of the mortgaged property. The loan-to-value ratio is an important risk indicator in connection with mortgages. The higher the loan-to-value ratio, the higher the potential loss in the event of a default on the mortgage loan.


Macroprudential measures

Macroprudential measures aim to safeguard or restore the stability of a financial system. This is accomplished by strengthening the resilience of the financial system and by countering the accumulation of systemic risk. Macroprudential measures affect the Swiss banking sector as a whole, and not just individual financial market participants. A good example is the countercyclical capital buffer, which was introduced in Switzerland on 1 July 2012.

Minimum exchange rate

The minimum exchange rate was a lower limit defined by the SNB for an exchange rate on the foreign exchange market, which it would not allow to be breached. From 6 September 2011 to 15 January 2015, the SNB maintained a minimum exchange rate of CHF 1.20 per euro. The SNB enforced this minimum exchange rate with the utmost determination, and, to this end, was prepared throughout this period to purchase foreign currency in unlimited quantities (foreign exchange market interventions). The purpose of the minimum exchange rate was to counter an exceptional overvaluation of the Swiss franc, as well as the associated threat of a deflationary trend (deflation), and thereby to ensure monetary conditions that were appropriate for the Swiss economy. On 15 January 2015, the SNB discontinued the minimum exchange rate due to developments in the major currency areas (press release).

Minimum reserves

In order to facilitate the smooth functioning of the money market, banks are required to hold a certain percentage of their Swiss franc short-term liabilities in minimum reserves. Valid minimum reserves comprise Swiss franc coins, banknotes and sight deposits held at the SNB. Details on fulfilment of the minimum reserve requirement are available in the 'Important monetary policy data' publication.

Monetary aggregates

The monetary aggregates are different categories of the money supply. The SNB's most important monetary aggregates are the monetary base and the M1, M2 and M3 monetary aggregates.

Monetary base

The monetary base is composed of the sum of banknotes in circulation plus sight deposits of domestic commercial banks held at the SNB. Other terms used for the monetary base include the M0 monetary supply and monetary stock.

Monetary conditions

Monetary conditions are shaped by interest rates and by the exchange rate. The SNB maintains price stability by ensuring that monetary conditions are appropriate for the Swiss economy.

Monetary policy

Monetary policy is the implementation of monetary policy instruments by the central bank to achieve economic policy goals. Monetary policy is therefore an area of economic policy. The SNB conducts its monetary policy in the interests of the country as a whole. By seeking to keep prices stable (price stability), the SNB helps to create an environment in which the economy can best exploit its production potential (Questions and answers on monetary policy strategy). The SNB's instruments include, in particular, open market operations (repo transactions, foreign exchange swaps, the purchase and sale of foreign currency and securities) as well as standing facilities (liquidity-shortage financing facility, intraday facility).

Monetary policy assessment

As a rule, the SNB conducts an in-depth monetary policy assessment every quarter. Based on a detailed analysis of the economic situation, the inflation forecast and the growth assessment are updated and a monetary policy decision is reached.

Monetary policy instruments

The SNB's monetary policy instruments comprise the operations and measures, as laid out in the National Bank Act and the 'Guidelines on monetary policy instruments', that it requires to carry out its monetary policy. These include open market operations (repo transactions, foreign exchange swaps, foreign exchange market interventions, the issuance and repurchase of SNB Bills) as well as the liquidity-shortage financing facility and the intraday facility. Interest on sight deposits held at the SNB (negative interest) also counts as a monetary policy instrument (Questions and answers on repo transactions and other monetary policy instruments).

Monetary policy strategy

The monetary policy strategy refers to the manner in which the SNB aims to fulfil its statutory mandate of ensuring price stability ( Questions and answers on monetary policy implementation).

The strategy, which has been in place since December 1999, consists of three elements: a definition of price stability, the publication of a conditional inflation forecast over the subsequent twelve quarters, and the SNB policy rate.

Monetary sovereignty

In Switzerland, monetary sovereignty is held by the Swiss Confederation, which entitles it to pass statutes on the banknote and coinage system (i.e. determine the currency unit, designate the authority responsible for issuing the money, determine denominations, etc.). In the National Bank Act, the Confederation confers the exclusive right to issue banknotes (note-issuing privilege) on the SNB. Further provisions on the banknote and coinage system are contained in the Federal Act on Currency and Payment Instruments.

Monetary stability

The term monetary stability has two dimensions: In the domestic economy, monetary stability is usually equated with price level stability and implies a constant level of domestic purchasing power of money (value of money). In the external dimension, by contrast, monetary stability implies the stability of the nominal exchange rate.

Monetary value

Monetary value is the purchasing power of money and expresses the volume of goods that can be bought for a monetary unit. A distinction may be made between the internal and external value of money. The internal value corresponds to the reverse value of the price level. When the price level rises, the volume of goods that can be purchased for a monetary unit decreases, and vice versa. Consequently, the price level and purchasing power of money always exhibit contrary development. The external value of money is the amount of foreign currency which can be purchased for a domestic monetary unit. The external value corresponds to the exchange rate in the indirect quotation.


Money is the generally accepted medium of exchange. It also serves as a store of value and unit of account (measure of value). In Switzerland, banknotes and coins (cash), as well as book money, are all referred to as money.

Money creation

This is the process by which money is created. On the one hand, the SNB is entitled to create money, because of its note-issuing privilege. On the other, commercial banks can create book money, by granting loans. Their means of creating book money are determined by the requirements of Swiss law regarding minimum reserves, and by the SNB's readiness to increase or reduce the money supply. Using its monetary policy instruments, the SNB indirectly steers interest rates on the money market, and thereby also the supply of money in Switzerland, via the demand for credit (higher interest rates means lower demand for credit and less money creation, and vice versa).

Money market

The money market is the market for raising and investing short-term liquidity. Short-term liquidity is defined as liquidity with a term of up to one year (for longer-term investments, cf. capital market). Loans are not covered on the unsecured money market, and covered on the secured money market (e.g. via repo transactions). By steering the liquidity on the secured Swiss franc money market, the SNB implements its monetary policy. Banks use the money market to balance and manage their liquidity. Commercial banks conduct money market transactions with each other on the interbank market.

M1 monetary aggregate

The SNB defines the M1 monetary aggregate as the sum of the currency in circulation, sight deposits held by the resident public at banks, plus savings and deposit accounts used mainly for payments (transaction deposits).

M2 monetary aggregate

The SNB defines the M2 monetary aggregate as the sum of the M1 monetary aggregate plus savings deposits. Excluded from the savings deposits are pension fund monies invested in schemes with restricted terms and tax benefits within the framework of the mandatory occupational pension scheme (pillar 2) and the individual pension schemes that are voluntary (pillar 3).

M3 monetary aggregate

The SNB defines the M3 monetary aggregate as the sum of the M2 monetary aggregate plus time deposits (vis-à-vis creditors and money market instruments).

Mortgage lending value

The mortgage lending value is the value of the mortgaged property that is used by the lender as the basis for the granting of the mortgage loan against the mortgaged property as collateral. Depending on the lending policy of the loan-granting institution, the mortgage lending value can equal the purchase price, the investment costs, the revenue value or the market value of the mortgaged property. It may, however, also be set lower (e.g. in the case of cautious valuation) or higher (e.g. in the case of preferential prices).

Mortgage loan

A mortgage loan is a loan against collateral in the form of property (pledged or involving the transfer of title deeds).


National Bank Act (NBA)

The National Bank Act (NBA, Federal Act on the Swiss National Bank) is the legal basis underlying the SNB's activities as Switzerland's central bank. It contains provisions relating to the SNB as joint-stock company, its organisation and its tasks.

National Bank Ordinance

The National Bank Ordinance contains provisions governing the implementation of the National Bank Act in the areas of statistics, minimum reserves and oversight.

Negative interest rate

If the reference interest rate is at zero, but there is a need for further monetary policy relaxation, the central bank can lower interest rates on its sight deposit accounts into negative territory. Since 22 January 2015, the SNB has charged interest of –0.75% on sight deposits held at the SNB that exceed a certain exemption threshold. This interest rate currently corresponds to the SNB policy rate.

Note-issuing privilege

The National Bank Act gives the SNB the exclusive right to issue Swiss banknotes. The SNB thus holds the banknote monopoly. The SNB issued its first banknotes on 20 June 1907, on the day it took up business (interim banknotes).


Open market operations

An open market operation is the purchase or sale of securities or other claims on the money market or capital market by a central bank. In contrast to standing facilities, the use of open market operations is initiated by the central bank, rather than a commercial bank. The SNB mainly uses open market operations, which belong to the monetary policy instruments, to manage the monetary base and thereby implement its monetary policy. Open market operations of practical relevance for the SNB include repo transactions, foreign exchange market interventions, foreign exchange swaps and securities transactions.

Over-the-counter (OTC) trading

Securities transactions not conducted via a stock exchange are referred to as over-the-counter (OTC) trading. Many derivatives, too, are traded on so-called OTC derivatives markets. Due to their strong international interconnectedness, large trade volumes and default risks, OTC derivatives markets constitute a potential threat to the stability of the financial system. The G20 and the Financial Stability Board (FSB) have therefore compiled recommendations to increase the transparency, integrity and stability of the OTC derivatives markets. In particular, the intention is to have standardised OTC derivatives cleared through central counterparties.


Price level

The price level is the weighted average of a number of goods prices in an economy. It is measured on the basis of a defined basket of goods which reflects the goods (goods and services) produced or consumed in the economy. A stable price level does not necessarily mean that individual prices are stable. For instance, when the prices of some goods rise they may be balanced out by a fall in the prices of other goods so that, overall, the price level remains unchanged. A rise in the price level signifies a decline in the purchasing power of money, i.e., on average, one monetary unit will buy a smaller number of goods units. Consequently, the price level and the value of money always move in opposite directions. In Switzerland, the national consumer price index (CPI) is the most important indicator for measuring the price level.

Price stability

Under the National Bank Act, the SNB is committed to the objective of price stability. According to the SNB definition, price stability is considered to prevail when the annual average inflation level, as measured by the national consumer price index (CPI), is below 2%, and there is also no deflation. The SNB is required to conduct its monetary policy in a manner that ensures price stability, while taking due account of economic developments.

Profit distribution agreement

The Federal Department of Finance (FDF) and the SNB agree on the profit distribution for a certain number of years, in order to smooth the SNB's profit distribution payments. The profit distribution agreement is based on the National Bank Act, which also stipulates that one-third of distributable profit is allocated to the Confederation and two-thirds to the cantons. In November 2016, the SNB and the FDF concluded a new agreement, which is valid for the financial years 2016 to 2020 (Questions and answers on equity capital and profit appropriation).

Provisions for currency reserves

Provisions for currency reserves represent the most important component of the SNB's equity capital. In accordance with the National Bank Act, the SNB sets up provisions to maintain the currency reserves at the level necessary for monetary policy. Independent of this financing function, the provisions have a general reserve function and serve as a buffer against the risk of loss (Questions and answers on equity capital and profit appropriation).

Purchasing power parity

Purchasing power parity is attained when the exchange rate is at the level where, for given price levels in two countries, the purchasing power of the two currencies is equivalent. Purchasing power parity is based on the law of one price, which is used to explain exchange rates.


Recall of banknotes

Under the Federal Act on Currency and Payment Instruments, the SNB can recall the current series of banknotes with effect from a given date if it is to be replaced by a new series. The SNB is obliged to exchange the recalled banknotes at their nominal value for 20 years. Recalled Swiss banknotes cease to be legal tender as of the date of recall.


According to a prevalent definition, a recession is a phase in the business cycle in which gross domestic product (GDP) declines for at least two quarters in succession.

Repo transactions

In a repo transaction, the cash taker sells securities to the cash provider and simultaneously agrees to repurchase securities of the same type and quantity at a later date. The interest rate used in a repo transaction is called the repo rate. Repo transactions are an important SNB monetary policy instrument for managing liquidity in the money market. The SNB can provide liquidity by acting as cash provider and absorb liquidity by functioning as cash taker. The SNB only accepts securities which it defines as collateral eligible for SNB repos (sufficient collateral).

Reserve series

Reserve series are banknote series which have never been put into circulation. In Switzerland, the fourth and seventh series are considered reserve series. These series would have been used if large numbers of counterfeits of the current banknotes had come into circulation. In this situation, the SNB would have replaced the counterfeit denomination or series.


In connection with financial stability, resolution refers to the orderly wind-down of a bank. The issues addressed by the Financial Stability Board (FSB) include resolution procedures for global systemically important banks. If a resolution of this kind can be achieved, financial stability is likely to be strengthened.



Securities are instruments traded on the money market and the capital market. They include shares, debt securities, Pfandbriefe and other bonds. For its repo transactions, the SNB accepts only highly rated and very liquid securities as collateral (sufficient collateral). The 'List of collateral eligible for SNB repos' shows which securities are accepted as collateral by the SNB.

Security features of banknotes

Security features are designed to prevent counterfeits as far as possible. The features are defined in the security concept. Swiss banknotes of the eighth series incorporate the following six features that can be recognised and verified easily: the moving number, the magic number, the coloured number, the chameleon number, the glittering number and the perforated number. In addition, these banknotes have other security features, such as the security thread and the watermark (security concept eighth series). The banknotes of the ninth series, which will gradually replace those of the eighth series between 2016 and 2019, contain a large number of both new and tried-and-tested security features (security concept ninth series). The new banknote series is characterised by a combination of complex security features and an intricate design, which makes forgery even more difficult.


Seigniorage refers to the income that central banks derive from the note-issuing privilege or, in other words, the profit derived from the creation of money. The SNB also earns seigniorage because it can fund its assets very cheaply – via banknote circulation and sight deposits – owing to its banknote monopoly. A large proportion of seigniorage is absorbed by the profit distribution to the Confederation and the cantons (profit distribution agreement).


In a financial transaction, settlement is the fulfilment of a payment or delivery obligation, i.e. the payment transfer or the transfer of the securities from the transmitting bank to the recipient bank.

SIC (Swiss Interbank Clearing)

SIC (Swiss Interbank Clearing) is the Swiss electronic interbank payment system, which has been operated since 1987 on behalf of the SNB by SIX Interbank Clearing Ltd, a subsidiary of SIX. It is a real-time gross settlement system (RTGS) with a queuing mechanism. Payments are processed individually and sequentially, i.e. on a gross basis, and the SIC participants' settlement accounts are fed from their sight deposit accounts at the SNB. At end-2015, SIC had 350 participants, settling both large-value and retail payments in Swiss francs through the system. SIC is an important element of the Swiss Value Chain.

Sight deposits

Domestic commercial banks hold sight deposits at the SNB. These sight deposits are valid as legal tender. The commercial banks' demand for sight deposits emanates from the statutory liquidity regulations and from the need for working balances in interbank cashless payment transactions (SIC). The sight deposits of foreign banks and institutions held at the SNB are used to settle payment transactions in Swiss francs.

SNB agencies

The agencies are cash distribution services operated by cantonal banks on behalf of the SNB. They are responsible for the issuance and redemption of cash in their region. The SNB's network of cash distribution services comprises two SNB bank offices in Zurich and Berne and 14 agencies.

SNB Bills

Debt certificates issued by the SNB with a term of up to one year. SNB Bills have been part of the set of monetary policy instruments since October 2007, and are used to absorb liquidity as part of the SNB's steering of sight deposits. In connection with the measures taken to combat the strength of the Swiss franc, the SNB suspended the issuance of SNB Bills in August 2011.

SNB inflation forecast

The inflation forecast is a forecast of movements in the inflation rate over the coming three years which the SNB releases once a quarter at its monetary policy assessment. It is conditional, because it is based on the assumption that the SNB will not change the key rate over the forecast horizon. The SNB bases its monetary policy decision on the inflation forecast and can thus react to signs of any divergence from price stability.

SNB policy rate

The SNB policy rate is the third element of the SNB’s monetary policy strategy besides the definition of price stability and the conditional inflation forecast ( Questions and answers on monetary policy strategy). The SNB seeks to keep the secured short-term Swiss franc money market rates close to the SNB policy rate. SARON is the most representative of these money market rates today. As of 13 June 2019, the SNB policy rate replaced the target range for the three-month Swiss franc Libor (London Interbank Offered Rate) in the SNB’s monetary policy strategy.


A bank or group of banks is solvent if it meets the capital adequacy regulations currently in force. In particular, this condition implies that it has sufficient assets to meet all its obligations. Only if a bank or group of banks is solvent, i.e. holds sufficient regulatory capital, can the SNB provide emergency liquidity assistance. To assess solvency, the SNB obtains an opinion from FINMA.

Stabilisation fund (StabFund)

The stabilisation fund (StabFund) was a limited partnership for collective investment set up by the SNB to take over the illiquid assets of UBS. The transfer of illiquid UBS assets to the stabilisation fund in autumn 2008 was part of a package of measures implemented by the Confederation and the SNB to support UBS, which had been weakened by the financial crisis. The SNB's contribution to the support measures was provided as part of its emergency liquidity assistance. In November 2013, UBS purchased the stabilisation fund from the SNB (press release).


Stagflation is the term used to describe an economic situation in which overall production sinks while at the same time the price level rises. The term stagflation is a combination of (economic) stagnation and inflation.

Swiss finish

Swiss finish is a term used to describe the Swiss regulations on financial stability, which go beyond the internationally agreed minimum requirements established by Basel III, in particular as regards capital requirements.


In 1998, the Federal Mint was renamed Swissmint (www.swissmint.ch). The 1848 Federal Constitution transferred the right to mint coins from the cantons to the Confederation. In 1855, the Confederation took over the 'Berner Münzstätte' (the old Bernese mint), which became responsible for supplying the country with the necessary coins. Since 1 January 1998, swissmint has been an independent unit of the Federal Finance Administration.

Swiss National Bank (SNB)

The Swiss National Bank (SNB) conducts the country's monetary policy as an independent central bank. It is obliged by the Federal Constitution and by the National Bank Act to act in accordance with the interests of the country as a whole. Its primary goal is to ensure price stability, while taking due account of economic developments. In so doing, it creates an appropriate environment for economic growth (Questions and answers on the SNB as a company).

Systemically important banks

Under the terms of the Banking Act, a bank or group of banks is considered to be systemically important if it performs functions in domestic loan and deposit-taking which are essential to the Swiss economy and cannot be substituted at short notice. Other criteria such as size, risk profile and interconnectedness are also taken into consideration when deciding on systemic importance. Systemically important banks in Switzerland must comply with special requirements (too big to fail), which go beyond the minimum standards established by Basel III (Swiss finish). The Banking Act gives the SNB the mandate to identify banks and bank functions as systemically important, following consultation with FINMA. At the end of 2015, Credit Suisse, UBS, Zürcher Kantonalbank, the Raiffeisen Group and PostFinance Ltd were classified as systemically important. At international level, the Basel Committee on Banking Supervision and the Financial Stability Board (FSB) have defined global systemically important financial institutions – a category to which both the Swiss big banks currently belong – which will in future have to meet additional capital requirements over and above the minimum standards established by Basel III.


Too big to fail (TBTF)

A bank is described as 'too big to fail' (TBTF) if its failure would have serious consequences for the functioning of the domestic or global financial system, and for the economy, meaning that, in the event of a crisis, the state would be forced to intervene to rescue the bank. Recommendations on alleviating the 'too big to fail' issue are at the heart of reform proposals issued by the Financial Stability Board (FSB). In the areas of capital, organisation, liquidity and risk diversification, Switzerland has issued regulations which have considerably reduced the systemic risk associated with the 'too big to fail' issue. The TBTF regulations were revised in 2015, imposing enhanced requirements on the big banks in various areas. Implementation is to be phased in by the beginning of 2020.

Total sight deposits

In addition to sight deposits of domestic banks, total sight deposits at the SNB include sight liabilities towards the Confederation, sight deposits of foreign banks and institutions, as well as other sight liabilities.


Unemployment, natural level

The natural level of unemployment is the level which is achieved when the overall economy is in long-term equilibrium, and which is compatible with constant inflation.

Unemployment rate

The rate of unemployment is the relationship between the number of unemployed people and the number of people in the labour force, expressed as a percentage.


Virtual currency

A virtual currency is a digital representation of a value that is tradable on the internet. While it performs certain functions of money, it is accepted as a means of payment only by the members of a specific virtual community. It is not accepted as legal tender anywhere. These currencies have their own denomination. They are issued and controlled by a non-regulated institution or a network of computers.


Worthless banknotes

After the statutory conversion period of 20 years, recalled banknotes become worthless and can no longer be exchanged. The countervalue of the banknotes not submitted for exchange will be remitted to the Swiss Fund for Emergency Losses. Worthless banknotes may still have collectors' value, however, and are traded by numismatists, antique shops and banks, with the price depending on supply and demand as well as on the condition of the banknotes. The SNB does not trade in worthless banknotes.