|  NEWS

The Swiss central bank lost 142.2 billion Swiss Francs between January and September this year as rising rates and a strong Franc lowered the value of the bank’s foreign investments.

The loss is the largest in the central bank’s 115-year history.

The Swiss National Bank’s (SNB) loss from its foreign-currency positions also included 24.4 billion in losses related to exchange rates, Reuters reports, as the solid Franc further lowered the value of its holdings.

“These losses may sound like a lot, but the SNB is not a normal company,” according to UBS economist Alessandro Bee.

“The problem is the stagflationary environment where equities lose, bonds lose, gold loses and the Swiss Franc becomes stronger. Normally bonds and gold gain when equities lose. But that's not happened in 2022.”

“Normal bankruptcy rules” do not apply, he went on to say, adding that the central bank would remain liquid providing the demand for Swiss Francs continues.

However, the loss could result in the SNB halting payments to the Swiss federal and cantonal governments in 2023.

Indeed, Canton Zurich received 716 million Francs as part of its share of the 6 billion from the central bank this year, but said there were no guarantees of the SNB payment.

Whereas, Zug said there wouldn’t be a problem should there be no SNB payout. “The SNB is not a normal bank, it's a central bank which has other tasks such as price stability and protecting the Swiss economy,” Zug's finance director, Heinz Taennler told Reuters news agency.

“We are not dependent on the payment from the SNB, but I can't say if that’s the case for other cantons.”

In addition, Vice Chairman of the central bank, Martin Schlegel said a move into negative equity would not change the SNB’s stance.

“We can pursue our tasks and fulfil our mandate even with negative equity capital,” he said in an interview last week.

“Nevertheless, it is important that we have enough equity. It helps the credibility of a central bank if it is well capitalised.”

Category

Tags

  • SNB,
  • Swiss Francs,
  • Stagflation,
  • Central Bank

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