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At an SNB Money Market Event in Geneva on Oct. 29, Petra Tschudin and Thomas Moser described how the bank provides central bank liquidity only against collateral that meets its requirements. They said the SNB GC Basket supports monetary policy and payments and is also the collateral standard in Switzerland’s interbank repo market. The speech says the SNB reviews its collateral policy as market conditions and technology change.
Petra Tschudin and Thomas Moser set out the Swiss National Bank’s approach to providing liquidity against collateral at its Money Market Event in Geneva on Oct. 29, explaining how the rules underpin monetary policy operations and help payments function. The SNB said its collateral policy is designed to protect its balance sheet while allowing liquidity to be supplied effectively, efficiently and transparently.
The speech says the SNB provides central bank liquidity to perform statutory tasks: implementing monetary policy in the Swiss franc money market, supporting cashless payments and contributing to financial stability. The event focused on the first two. The bank supplies liquidity against assets that meet requirements in its collateral policy, which sets the framework for collateral used in its credit and repo transactions.
According to the speakers, collateralisation limits the SNB’s credit risk. If a counterparty cannot meet its obligations, the SNB can sell the pledged collateral to avoid a loss. The speakers described this protection as important to preserving the bank’s financial independence and its ability to carry out its mandate over time.
The speech identified the SNB GC Basket as a key part of the framework. The SNB said it combines high quality requirements with a broad international focus and has become the collateral standard in the Swiss interbank repo market. A common standard and integrated market infrastructure, the speakers said, help market participants mobilise collateral and support monetary policy implementation and payments.
How Collateral Supports Swiss Liquidity
The policy affects more than the SNB’s own exposure to borrowers. It shapes which assets financial institutions can use to obtain central bank liquidity and can influence how readily they redistribute liquidity among themselves in the money market. The speakers described collateral policy as a technical framework with practical effects for market participants.
For monetary policy, the SNB uses repo transactions to provide or absorb liquidity in order to keep short-term money-market rates close to its policy rate. The speech said that, in the current environment described by the speakers—where the policy rate is non-negative and liquidity remains high—open-market operations are used to absorb liquidity. For payments, banks may need extra funds at short notice because incoming and outgoing payments do not arrive at the same time. The SNB says it can provide liquidity when needed to support smooth settlement.
The shared GC Basket standard and the infrastructure around it matter because collateral must be usable in practice, not merely eligible on paper. The SNB’s stated aim is to balance safeguards with the speed and reliability needed to move funds through markets and payment systems.
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The SNB’s Three Liquidity Tasks
The National Bank Act assigns the SNB responsibilities that it carries out in part by making liquidity available to the financial system. The speech grouped these purposes into money-market liquidity for monetary policy, liquidity needed to support cashless payments and liquidity support that contributes to financial stability. The Geneva event concentrated on the first two rather than serving as an announcement of a new lending facility.
The speakers described how the SNB’s operational role changes with market conditions. In a negative-interest-rate environment, the bank sometimes supplied liquidity even when the system already held high levels, with the stated aim of countering temporary upward pressure on short-term rates. In the environment described in the speech, open-market operations instead absorb liquidity. The speech also referred to support provided during the Credit Suisse crisis, distinguishing that financial-stability role from routine money-market and payment operations.
The SNB said it reviews its collateral policy continuously and adjusts it when necessary to reflect changing market conditions and technological developments. The source material does not describe a specific new change to eligibility rules or the GC Basket on Oct. 29.
“The SNB provides the financial system with central bank liquidity.”
— Petra Tschudin and Thomas Moser, in their SNB speech
No Specific Rule Change Announced
The speech describes the SNB’s existing approach but, in the supplied material, does not announce a specific adjustment to collateral eligibility, haircuts, counterparties or operating procedures. It is also not clear from the text whether any particular change is planned in response to market or technology developments.
The speakers said the GC Basket has become the Swiss interbank repo market’s collateral standard, but the source does not provide market-share figures or quantify how much the common standard improves mobilisation or payment performance. The speech explains the SNB’s rationale and operating framework; it does not offer a new measurement of their effects.
Ongoing Review of Collateral Rules
The SNB said it will continue to review its collateral policy and adjust it as needed for changes in market conditions and technology. The speech does not set a timetable for a policy decision or identify a next milestone. Any future changes to eligible collateral or operational arrangements would need to be confirmed by the central bank in later communications.
For now, the development is the SNB’s public explanation of how collateral supports its liquidity operations, rather than a reported change in those operations. Market participants can look to subsequent SNB notices and policy documents for details if the bank revises its framework.
Key Questions
What did the SNB announce on Oct. 29?
Petra Tschudin and Thomas Moser presented the SNB’s collateral policy at a Money Market Event in Geneva. The supplied speech describes the policy and its purposes; it does not announce a specific new collateral rule.
Why does the SNB require collateral for liquidity?
The SNB says collateral limits its credit risk. If a counterparty cannot meet its obligations, the bank can sell the collateral to seek to avoid a loss and protect its balance sheet.
What is the SNB GC Basket?
The SNB GC Basket is a collateral basket that the SNB says combines high quality requirements with a broad international focus. The bank says it has become the standard for collateral in the Swiss interbank repo market.
How does the SNB use liquidity operations?
The speech says repo transactions can add or absorb liquidity to help keep short-term money-market rates close to the SNB policy rate. The bank may also provide liquidity when needed to support cashless payments.
Will the SNB change its collateral policy?
The SNB says it reviews the policy on an ongoing basis and adjusts it when necessary. The speech does not identify a planned change or give a timetable for one.
Source: snb.ch
