Following the abandonment of the fixed exchange rate between Euro and Franc at the beginning of 2015, the Swiss national Bank (SNB) now posted a loss of CHF50.1bn (€47.36bn) for the first half of 2015.
The decline was almost entirely caused by losses in foreign currency positions due to the appreciation of the Swiss Franc following the abandonment of the fixed exchange rate in January which led to a negative result of CHF 52.2bn (€49.45bn) in total.
At the same time, the appreciation of the Franc only had a marginal effect on the SNB’s balances, generating a total profit of CHF 571m (€540.8m). The bank’s gold holding also generated losses of CHF3.5bn (€3.3bn).
While the SNB is not obliged to book profits, its surpluses are generally redistributed to its owners, which include the Swiss Cantons, but also private shareholders. SNB regulations on the redistribution of profits stipulate that in the event of a loss, payments shall be deferred. Consequently, the losses could have a detrimental effect on the finances of Swiss Cantons.
Crucially, they could also affect the Central Bank’s key task of maintaining price stability through interventions in the currency market, as the bank’s capital base declined from 15.4% at the end of 2014 to 5.9% by mid-2015. This marks a dramatic decline compared to pre-crisis levels, between 2005 and 2007, the SNB’s capital base exceeded 50%. The bank’s regulations do permit a negative captial base, however, SNB chairman Thomas Jordan previously stressed the importance of Central Bank’s to maintain a healthy capital base in order to ensure price stability.