Martin Schlegel: A pillar of financial stability - the Swiss National Bank's role as lender of last resort

Introductory remarks by Mr Martin Schlegel, Vice Chairman of the Governing Board of the Swiss National Bank, to the "Alumni WWZ Basel" (Faculty of Business and Economics, WWZ/Wirtschaftswissenschaftliches Zentrum), Basel, 9 November 2023.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Ladies and gentlemen

Today is 'National Future Career Day', when girls and boys throughout Switzerland accompany their parents to their workplace and spend the day watching them at their jobs. 1 I too had a visitor at work today, and once again I found that children bring fresh perspectives and often ask quite fundamental questions. This is precisely what I want to do in my speech today: to take a close look at a core task of the SNB in relation to financial stability – its role as lender of last resort.

In this role, the SNB made up to CHF 168 billion in liquidity available for managing the crisis at Credit Suisse this spring. Such a number is hard to grasp. It corresponds to approximately one-third of Credit Suisse's balance sheet total at the time, or double the annual expenditure of the Swiss Confederation.

Why is the SNB the lender of last resort and why does it provide liquidity assistance in this capacity? How does it provide this liquidity? What conditions does it set, and to whom does it provide liquidity? These are the fundamental questions I want to address today, while also taking an in-depth look at the challenges and limits involved. I will conclude by talking about the liquidity assistance provided to Credit Suisse.

The role as lender of last resort

Acting as lender of last resort means that a central bank makes liquidity assistance available to banks when they suddenly need substantial liquid funds which they are no longer able to obtain on the market. It is an important part of a central bank's contribution to the stability of the financial system.