Following the Swiss National Bank’s decision to abandon its 3-year-old cap of 1.20 francs per euro, which sent the franc soaring against Europe’s single currency on Thursday, the European markets are trying to assess the damages.

Immediately after the SNB’s announcement, the Swiss currency soared by almost 30%, trading as high as 0.8052 francs per euro. This development has affected European equity markets, with the Swiss benchmark stock index falling by more than 13% and Europe’s shares and bond yields tumbling.

It should be noted that the cap was introduced by the Swiss bank in 2011 in response to investors buying up huge amounts of the Swiss franc as a safer alternative to the euro.

Its statement on Thursday, the SNB explained this drastic move. Read below the bank’s full statement.

The minimum exchange rate was introduced during a period of exceptional overvaluation of the Swiss franc and an extremely high level of uncertainty on the financial markets. This exceptional and temporary measure protected the Swiss economy from serious harm. While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate. The economy was able to take advantage of this phase to adjust to the new situation.

Recently, divergences between the monetary policies of the major currency areas have increased significantly – a trend that is likely to become even more pronounced. The euro has depreciated considerably against the US dollar and this, in turn, has caused the Swiss franc to weaken against the US dollar. In these circumstances, the SNB concluded that enforcing and maintaining the minimum exchange rate for the Swiss franc against the euro is no longer justified.

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The SNB is lowering interest rates significantly to ensure that the discontinuation of the minimum exchange rate does not lead to an inappropriate tightening of monetary conditions. The SNB will continue to take account of the exchange rate situation in formulating its monetary policy in future. If necessary, it will therefore remain active in the foreign exchange market to influence monetary conditions.

The SNB’s shock move will especially affect the households with Swiss-franc loans. According to estimates, more than 65,000 people whose home loans were granted in this currency will face the impact caused by its sharp rise.