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At the Swiss National Bank’s Money Market Event in Geneva on Oct. 29, Petra Tschudin and Thomas Moser described how its collateral policy governs liquidity supplied to financial institutions. They said collateral protects the SNB against credit risk while the GC Basket and shared repo-market infrastructure help banks mobilise assets for monetary operations and payments.
Swiss National Bank Governing Board members Petra Tschudin and Thomas Moser set out the central bank’s collateral policy at its Money Market Event in Geneva on Oct. 29, explaining how the SNB provides liquidity to financial institutions only against assets that meet its requirements. The policy affects the SNB’s monetary operations and the ability of banks to manage short-term liquidity and payments.
The SNB said it provides central-bank liquidity to perform statutory tasks that include implementing monetary policy in the Swiss franc money market, supporting cashless payments and contributing to financial stability. The event’s focus, according to the speech, was the first two uses: money-market liquidity and payments. Liquidity support in a crisis was described as a further task, illustrated in the presentation by support provided during the Credit Suisse crisis.
The central bank uses repo transactions to provide or absorb liquidity in the money market, with the aim of keeping short-term 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. It contrasted this with periods of negative interest rates, when the SNB sometimes supplied liquidity to counter temporary upward pressure on short-term rates.
The SNB said its General Collateral (GC) Basket has a key role in monetary policy implementation and payments. The basket combines high quality requirements with international breadth and has become an established collateral standard in the Swiss interbank repo market, according to the speakers. A common standard and integrated market infrastructure can help financial institutions mobilise collateral, they said.
Collateral Shapes Swiss Money Markets
The policy determines which assets counterparties can use to obtain central-bank liquidity, so it has practical consequences for banks’ day-to-day funding and payment operations. When cash flows arrive and leave at different times, an institution may need liquidity at short notice to complete payments. The SNB said it makes liquidity available when needed to support smooth and efficient payments, subject to its collateral rules.
Collateral requirements also manage the SNB’s exposure when it lends or enters repo transactions. If a counterparty cannot meet its obligations, the SNB can sell pledged assets to limit potential losses, the speech said. In the central bank’s account, this protection supports its balance sheet and its capacity to carry out its statutory mandate over time.
The shared GC Basket standard matters beyond individual SNB operations. A widely used set of eligible collateral and connected market infrastructure can make it easier for banks to transfer assets and redistribute liquidity among themselves. The speakers presented this as support for both monetary policy transmission and the functioning of payments, not as a guarantee against market disruption.
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How SNB Liquidity Operations Work
The National Bank Act assigns the SNB the tasks cited in the speech, including monetary policy, payment-system support and contributing to financial stability. The SNB’s collateral policy sets principles for collateralisation of its credit and repo transactions. The speakers described an effective policy as one that accounts for assets institutions can legally and operationally deliver, and an efficient one as allowing collateral to be mobilised quickly, reliably and with reasonable effort.
Swiss franc money-market transactions settle through sight deposits at the SNB. The total volume of those deposits is connected to monetary policy implementation. The speech described a change in the direction of operations across interest-rate environments: at times during negative rates, the SNB supplied liquidity to limit temporary upward pressure on short-term rates; under the conditions outlined at the event, it uses operations to absorb liquidity.
Collateral policy also affects liquidity distribution between banks, not only the SNB’s direct lending. The speakers said the GC Basket has become an established collateral standard in the interbank repo market. They also said the SNB reviews its policy on an ongoing basis and adjusts it when market conditions or technology change.
“The SNB provides the financial system with central bank liquidity. It always does so against collateral, and this has to meet requirements set out by the SNB in its collateral policy.”
— Petra Tschudin and Thomas Moser, speaking at the SNB Money Market Event
Policy Changes Remain Unspecified
The speech described the SNB’s current approach but did not announce a specific revision to collateral eligibility, the GC Basket or operating procedures. It said the policy is reviewed continuously and adjusted as needed, but the supplied report does not identify a timetable, proposed changes or particular technological developments that could prompt a revision.
The presentation also described the current liquidity environment in broad terms: a non-negative policy rate and still-high liquidity. It did not provide figures in the available material for liquidity volumes, repo operations or the size of collateral holdings. The cited Credit Suisse support was referenced as a crisis example, but the material here does not state amounts or detailed terms.
Ongoing Reviews Guide Future Adjustments
The SNB said it will continue to review its collateral policy and make adjustments as market conditions and technological developments warrant. No specific next review date or policy change was announced in the event material.
For banks and money-market participants, the immediate relevance is the existing framework: eligible collateral must meet SNB requirements, and the GC Basket remains an established standard in the Swiss interbank repo market, according to the speakers. Any future change to eligibility or operating arrangements would clarify how institutions can mobilise assets when seeking liquidity from the central bank or transacting with other banks.
Key Questions
What did the SNB announce on Oct. 29?
No specific policy change was announced in the supplied speech. Petra Tschudin and Thomas Moser explained how the SNB provides liquidity against qualifying collateral and how the framework supports monetary policy and payments.
Why does the SNB require collateral?
Collateral limits the SNB’s credit risk. If a counterparty fails to meet its obligations, the SNB said it can sell the pledged assets to help avoid a loss and protect its balance sheet.
What is the SNB GC Basket?
It is a basket of collateral that the speakers described as combining high quality requirements with an international focus. They said it has become an established collateral standard in the Swiss interbank repo market.
How does the SNB use liquidity operations?
The SNB uses repo transactions to provide or absorb liquidity, with the aim of keeping short-term money-market rates close to its policy rate. The speech said operations were being used to absorb liquidity in the conditions described at the event.
Will the SNB change its collateral rules?
The SNB said it reviews the policy on an ongoing basis and adjusts it when necessary. The speech did not specify a forthcoming change or give a date for one.
Source: snb.ch
