COVID, financial markets and digital growth according to the SNB

Andréa Maechler and Thomas Moser, analysts at the Swiss National Bank, have done a comprehensive study on the effects of the Coronavirus pandemic

The coronavirus pandemic (COVID-19) is, in many ways, an unprecedented crisis. The economic shock has been enormous worldwide and has affected both supply and demand.
In order to mitigate the consequences for the economy, rapid and innovative measures were required, also in the Swiss Confederation.
The Swiss National Bank (SNB) played an important role in this respect by preventing a strong appreciation of the franc by means of currency purchases.

COVID-19, financial markets and digital transformation

As part of a concerted action between central banks, it also helped to ease tensions in the US dollar funding markets.
In addition, with the establishment of the SNB-COVID-19 refinancing scheme as part of Switzerland’s package of measures, the SNB facilitated the provision of loans to small and medium-sized enterprises, which were particularly hard hit by the pandemic.
However, the implications of the pandemic for central banks go far beyond short-term crisis management.

Digitization process accelerated by nature

The coronavirus and the associated containment measures have accelerated the digitization process.
These developments have consequences for various areas of central bank activity, particularly with regard to payment media and systems.
Big data and automation make it possible to exploit new, non-standardized data, which are very useful for the assessment of economic trends, especially during a pandemic.
They also change the dynamics in financial markets. For example, programs based on algorithms are increasingly being used in currency trading.
With the increasing dependence on IT systems, operational challenges also increase, not least in connection with cyber risks.
The SNB makes its contribution to the cybersecurity of the financial sector by participating in various projects in this field together with the authorities and players in the Swiss financial centre.