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The SNB reports a half-year loss of CHF 95.2 billion. The assessment of five economists.
The Swiss National Bank manages foreign currencies in the amount of around 1,000 billion Swiss francs. Money she amassed fighting the strong franc. To date, the SNB has been able to distribute a large amount to the Confederation and cantons from the investment result almost every year. In the first half of 2022, however, the SNB posted a gigantic loss of CHF 95.2 billion. The classification of economists on the three most important questions:
Is the distribution from 2022 at risk?
You will only be billed at the end of the year. But the massive half-year loss raises the question of whether the federal government and the cantons will be left empty-handed in the current financial year.
- Dirk Niepelt, Professor of Economics at the University of Bern: “It looks as if there will be no distribution this year. At least we’re close to the limit.”
- Jan-Egbert Sturm, Head of KOF/ETH Zurich: “With such large sums, it is actually not very likely that the distribution will remain at the same level as it has been up to now.”
- Aymo Brunetti, Professor of Economics at the University of Bern: “This does not mean that there will be any general change in the fact that the SNB will usually distribute profits. But this year it will be special.”
- Yvan Lengwiler, Professor of Economics at the University of Basel: “It would actually be decent for the SNB not to increase the reserves this year at least so that more money is available for the public sector.”
Can the tide turn?
The SNB invests its foreign currencies in the financial markets, for example in stocks or bonds. In the first half of the year, the financial markets dived. This resulted in a hefty loss for the SNB. What’s next?
- Klaus Wellershoff, economist and management consultant: “The recession that is now very likely to hit the global economy is not yet reflected in the prices. And that will mean another loss of billions, at least for the SNB’s equity investments.”
- Aymo Brunetti: “If the Swiss franc continues to appreciate with this large balance sheet and we have losses on the financial markets, there can be a few years of low profits and therefore little or no distributions.”
- Yvan Lengwiler: «I don’t think that the distributions are at risk in the long term. With a balance sheet that big, they make a decent profit on average.”
Will billions in losses put the SNB under pressure?
The SNB must ensure stable prices. Whether it makes profits or losses on its foreign exchange investments is of secondary importance. But can steep losses jeopardize the stability of the SNB? Finally, losses eat away at equity.
- Yvan Lengwiler: “I don’t think the SNB’s credibility would suffer significantly if its equity capital were to fall or even become negative. There are examples in the world of central banks that get by with very, very little equity. »
- Jan-Egbert Sturm: «Theoretically, a central bank like the SNB can also have negative equity, without this by definition having to entail problems. Only: We are all beginning to doubt the SNB’s ability to still conduct sensible monetary policy.”
- Klaus Wellershoff: “I believe that the monetary policy of recent years has laid the foundation for us to lose a good deal of our very high level of trust in the National Bank.”