Last year, the SNB lost more money than ever before. And it is not alone: central banks around the world also recorded heavy losses. As a consequence, money from central banks in many countries ceased to flow to governments (at least for Germany and The Netherlands and probably more coming).
The Swiss National Bank reported on Monday an annual loss of 132.5 billion Swiss francs ($141.54 billion), in line with the provisional calculations it announced in January.
The loss, the biggest in the central bank’s 115-year history, was caused by a plunge in the value of the SNB’s investments caused by bond and stock market declines last year.
A strengthening of the Swiss franc also had a negative effect, reducing the SNB’s holdings and returns from foreign investments when they were converted back into Swiss francs.
The loss, which followed a profit of 26 billion francs in 2021, means the SNB will make no payout to the Swiss central or regional governments or dividend to investors for only the second time since it was established in 1907.
Most of last year’s shortfall could be attributed to the 131.5 billion francs lost on foreign currency positions, with its bond holdings losing 72 billion francs in value and its share portfolio worth 41 billion francs less.
The reported loss wiped out the SNB’s distribution reserve of 102.5 billion francs, meaning the central bank posted a net loss of 39.5 billion francs after an allocation for provisions was taken into account.
The SNB, which is due to give its next monetary policy update on March 23, declined to comment on how the loss could affect its future monetary policy.
Analysts did not think it would influence the matter, with the SNB having 66 billion francs in equity despite the massive losses.
“Even if equity was wiped out altogether this wouldn’t change monetary policy in the short term as the SNB can operate without equity,” said UBS economist Alessandro Bee.
“Only in the case of a prolonged period of negative equity I would see an impact on monetary policy. But we’re far from such a scenario even after the huge loss of last year.” [Reuters]
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