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At the SNB’s Money Market Event in Geneva on Oct. 29, Petra Tschudin and Thomas Moser set out how the bank provides liquidity only against sufficient collateral. They said its GC Basket and shared repo-market infrastructure help support monetary policy operations and payments, while collateral requirements protect the SNB against credit risk.
Petra Tschudin and Thomas Moser of the Swiss National Bank said on Oct. 29 that the SNB provides central bank liquidity only against sufficient collateral, outlining how its rules support monetary policy operations, payment flows and protection of the bank’s balance sheet. Their remarks at the SNB’s Money Market Event in Geneva focused on the role of collateral policy in the Swiss franc money market and the bank’s payments infrastructure.
The SNB said its collateral policy sets the conditions for securing credit and repo transactions. Collateral reduces the bank’s exposure if a counterparty cannot meet its obligations: the SNB can sell assets pledged to it to recover funds. The bank described this safeguard as important to preserving its balance sheet and its ability to carry out its statutory mandate over time.
The speakers identified three statutory functions for which the SNB makes liquidity available: implementing monetary policy in the Swiss franc money market, supporting cashless payments and contributing to financial stability. The event concentrated on the first two. In money-market operations, the SNB uses repo transactions to add or absorb liquidity to help keep short-term rates close to its policy rate. Banks may also need liquidity during the day because incoming and outgoing payments do not arrive at the same time.
The SNB GC Basket was presented as a central part of this framework. The bank said it combines high quality requirements with a broad international focus and has become an established collateral standard in the Swiss interbank repo market. According to the SNB, a common standard and integrated market infrastructure make collateral easier to mobilise, supporting monetary-policy implementation and payments.
Collateral Connects Liquidity and Payments
The policy governs more than which assets can secure SNB lending. It also affects whether banks can obtain central-bank liquidity quickly and redistribute it among themselves. That matters for money-market operations, where the SNB uses repo transactions to influence available liquidity, and for daily payments that must settle even when a bank’s cash flows are temporarily uneven.
The bank’s emphasis on shared standards points to an operational benefit: if market participants can use familiar collateral arrangements and infrastructure, they may be better positioned to mobilise assets when liquidity is needed. The SNB says the GC Basket supports that process. This is the bank’s account of the framework’s role; the speech does not quantify any effect on transaction costs, settlement performance or market resilience.
Collateral rules also define the limits of the SNB’s exposure to counterparties. By requiring sufficient security, the bank seeks to reduce the chance that liquidity provision leaves it with a loss if a borrower defaults. The policy therefore links the availability of central-bank liquidity with risk controls intended to protect the institution’s capacity to perform its public functions.
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Three Statutory Liquidity Roles
The SNB’s speech placed collateral policy within the responsibilities assigned to it by the National Bank Act. It said liquidity provision serves the Swiss franc money market, cashless payments and financial stability. The event’s stated focus was narrower: market liquidity and payments, rather than the full range of emergency support tools.
The speakers described how the SNB’s money-market operations have varied with conditions. During the period of negative interest rates, the bank sometimes supplied liquidity even when the financial system already held large amounts, aiming to counter temporary upward pressure on short-term rates. In the environment described in the speech, with a non-negative policy rate and liquidity still high, its open-market operations were being used to absorb liquidity.
The speech also referred to liquidity support provided during the Credit Suisse crisis as an example of the SNB’s financial-stability role. That was offered as context, not as a new announcement of support or a change to the collateral framework. The SNB said it reviews its collateral policy continuously and adjusts it when market conditions or technology change.
No Specific Rule Changes Announced
The event material describes the SNB’s existing approach but does not announce a particular amendment to eligible collateral, haircuts, counterparties or operating procedures. It also does not provide detailed figures for the GC Basket’s composition, the volume of collateral mobilised, or the measurable effect of shared infrastructure on payment performance.
The speech says the SNB reviews the policy continuously, but it does not identify a timetable for a forthcoming review or a trigger for a particular change. Any implications beyond the bank’s stated description—such as how individual institutions may be affected—remain unspecified in the available material.
Ongoing Review, No Date Set
The SNB said it will continue to review its collateral policy and adjust it when market conditions and technological developments warrant. The remarks do not set out a next decision date, a consultation process or any immediate implementation step.
For now, the confirmed development is an explanation of the existing framework at the Geneva event, rather than a policy change. Any future change would need to be assessed from a specific SNB announcement describing the affected collateral rules and when they would take effect.
Key Questions
What did the SNB announce on Oct. 29?
Petra Tschudin and Thomas Moser presented the SNB’s approach to collateral policy at its Money Market Event. The material explains the existing framework and does not announce a specific rule change.
Why does the SNB require collateral?
Collateral reduces the SNB’s credit risk when it provides liquidity. If a counterparty cannot meet its obligations, the bank says it can sell pledged assets to recover funds and protect its balance sheet.
What is the SNB GC Basket?
The SNB described the GC Basket as a collateral basket with high quality requirements and a broad international focus. It said the basket has become an established standard in the Swiss interbank repo market.
Does the speech change the collateral rules?
No specific change was announced in the material provided. The SNB said it reviews its policy on an ongoing basis and adjusts it as needed, but gave no date or details for a forthcoming revision.
Source: snb.ch
