SNB Suffers Record 23 Billion-Franc Loss

The Swiss National Bank estimates that it incurred a record loss of 23 billion francs ($23 billion) last year after it abandoned its currency cap.

The appreciation of the franc that followed the Jan. 15 decision resulted in a loss of 20 billion francs on its foreign-currency positions, the central bank said in a statement on Friday based on preliminary calculations. It said it would still pay a dividend of 15 francs per share and distribute 1 billion francs to the federal government and cantons.

While the SNB doesn’t need to generate a profit for monetary-policy purposes, municipalities have come to rely on an annual handout from the central bank to fund local spending. Their circumstances are already straitened by slower economic growth, brought on by the currency’s ascent from the cap of 1.20 per euro to about 1.09 now.

“The good news is that the cantons and the government aren’t going to have to go without their money,” said David Marmet, an economist at Zuercher Kantonalbank. “From a political point of view, it removes some pressure on the discussion about the right monetary policy. ”

Economic growth slowed in 2015 and consumer prices fell after the SNB unexpectedly abandoned its currency ceiling. Policy makers have argued that the cost of maintaining it would have been out of proportion to its benefits to the economy.
Consumer prices fell 1.3 percent in December from a year earlier, data from the Swiss Statistics Office in Neuchatel showed.

Franc Appreciation

The Swiss currency finished 2015 more than 10 percent stronger against the euro, which constitutes more than 40 percent of the SNB’s foreign-exchange holdings. It depreciated nearly 1 percent against the dollar, reflecting the recovery of the U.S. economy and the prospect of the Federal Reserve’s first interest-rate increase in nearly a decade.

The decision to give up the currency cap won SNB President Thomas Jordan and his governing board colleagues criticism from Social Democrat politicians, who feared a rise in unemployment.

The seasonally adjusted jobless rate remained at 3.4 percent in December, according to a statement from Switzerland’s State Secretariat for Economic Affairs.

The SNB’s 2015 result exceeds the 20.8 billion-franc loss caused by a strengthening currency in 2010, when Greece asked for its first bailout. That led to calls for then-President Philipp Hildebrand to resign.

The SNB is a joint-stock company, with the majority of shares held by cantons and cantonal banks. In 2013, the cantons had to forgo their payout after the price of gold slumped. The SNB earnings are calculated by comparing asset prices at the start and end of each period.

The SNB will published the definitive figures for 2015 on March 4.


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell