Swiss Central Bank makes a Loss of 132 Billion Francs
After a record loss of 132 billion Swiss francs, the Swiss Central Bank will not pay any money to the public sector for 2022. In the previous year, the Swiss National Bank distributed the maximum possible amount of six billion francs. Two-thirds of this amount went to the cantons and one-third went to the federal government.
A year ago, the central bank was still able to profit from a lot, having ended 2021 with a profit of CHF 26.3 billion. On this basis, the private shareholders of the Swiss National Bank also received a maximum dividend of CHF 15 per share. That distribution is also now declining, the National Bank announced Monday in its first brief review of last year.
Up Again in the Fourth Quarter
The Swiss National Bank is one of the few central banks whose shares are listed on the stock exchange. However, the rights of private shareholders are severely restricted by the National Bank Act. The largest private shareholder is businessman Theo Siegert from Dusseldorf with a stake of 5 percent. Has no influence: each private contributor has a maximum of 100 votes.
The huge loss was not surprising. After the first nine months, the price was CHF 142.4 billion, which was even higher than the year as a whole.
It also means that the Swiss National Bank posted a profit of CHF 10 billion in the fourth quarter. Large fluctuations in earnings are typical given the huge balance sheet that the National Bank has built up in recent years.
In her struggle against the overvaluation of the franc, she amassed a huge stock of foreign exchange. The money is invested in bonds, stocks, and gold, among others. If the value of these investments changes, the result of the SNB also increases or decreases.
Exchange rate effects also greatly affect the specific valuation gains or losses at the balance sheet date, depending on how the value of the Swiss franc develops in relation to the euro and the dollar.
The SNB will only provide details on the evolution of earnings when the annual report is submitted on March 22nd. However, it is clear that the decline in stock prices around the world contributed significantly to this decline. The Swiss National Bank owns about a quarter of its equity investments. Higher interest rates have taken a toll on government bond prices, which are another major focus for investment.
According to the central bank, foreign currency holdings resulted in a total loss of CHF 131 billion. On the other hand, gold holdings resulted in a slight valuation gain of CHF 0.4 billion because the price of gold rose slightly overall over the year.
The massive shortfall wiped out the existing distribution reserve of CHF 102.5 billion and resulted in a balance sheet loss of approximately CHF 39 billion.
In accordance with the provisions of the National Bank Act and the dividend agreement between the Federal Ministry of Finance and the Swiss National Bank, this balance sheet loss makes it impossible to make a distribution for the fiscal year 2022.
Depending on how the market develops, profits in the double digit billion range could be achieved again in the current year. It remains to be seen if this will be high enough to make the public sector once again happy with the distribution. First of all, the Swiss National Bank will have to properly replenish its distribution reserves.
UBS also notes that income from negative interest will not apply this year and that the SNB will have to pay interest on a large part of demand deposits at an interest rate of 1% and more. This makes the task more difficult.