Banking
Swiss National Bank With Biggest Loss In Over a Century
Sep
The Swiss National Bank’s (SNB) loss in the first half of this year amounted to CHF 95.2 billion, which is more than $100 billion and the biggest loss since the central bank’s founding in 1907, Reuters reported.
The factors
Appreciation of the Swiss franc, dropping bond prices, and stock market declines have put a big dent in the bank’s foreign currency holdings.
The bank’s Q2 loss was CHF 62.4 billion, the worst quarterly performance in its history. Credit Suisse economist Maxime Botteron assuaged concerns, commenting:
The loss is historic, but most of it is an unrealized paper loss relating to lower valuations of bonds and shares. I don’t think this will have any effect on the SNB’s monetary policy at all, the only impact may be on the public finances because the SNB’s payout to the government and cantons could be less next year.
The SNB is immune to liquidity issues
As a central bank, the SNB is immune to liquidity problems because it can print money to meet its payment obligations. However, the fact might not be all that consoling. The bank lost CHF 97.4 billion from foreign currency assets in H1/2022 and a profit of just CHF 2.4 billion, which was from gold holdings.
The stronger franc diminished foreign investment value. Due to exchange rates, the situation was exacerbated by a CHF 10.3 billion loss.
Profit was ‘not the aim’
Last year, SNB Chairman Thomas Jordan commented making profits was not the SNB’s goal. Its policy goal of keeping inflation below 2% wouldn’t be affected. He said to bank shareholders in April last year:
The SNB’s monetary policy mandate always takes precedence, and there can also be times when fulfilling this mandate means accepting losses.
In June this year, the central bank hiked interest rates in an effort to control inflation. This is the first raise in 15 years, and further ones are expected.