BLBG:SNB Spent $19.5 Billion in 2011 to Stem Franc Gains, Defend Currency Cap
The Swiss central bank spent 17.8 billion Swiss francs ($19.5 billion) in 2011 to stem the currency’s “massive overvaluation” and enforce an exchange- rate cap to protect the economy.
The Swiss National Bank (SNBN) bought foreign currencies from a wide range of counterparties in Switzerland and abroad, the Zurich-based central bank said in an e-mailed statement today. The SNB had a profit of 13.5 billion francs in 2011 compared with a loss of 19.2 billion francs the previous year, in line with preliminary estimates published on Jan. 13.
The SNB’s decision to impose a franc cap of 1.20 versus the euro on Sept. 6 has helped protect the economy and stabilized currency holdings amassed during 15 months of interventions in 2009 and 2010. Interim Chairman Thomas Jordan, who declined to comment on monetary policy at a briefing in Bern today, has pledged to defend the ceiling with the “utmost determination” if needed by purchasing currencies.
“Today’s figures show that the SNB did the right thing by imposing the cap,” said Jan Amrit Poser, chief economist at Bank Sarasin in Zurich. “Not only did it stabilize the Swiss economy, but as a side effect also helped the central bank reverse losses.”
The franc, which is traditionally considered a haven in times of global turmoil, weakened against the euro after the release, trading at 1.2055 per euro at 11:20 a.m. in Zurich. Versus the dollar, it was at 91.23 centimes.
Gold Holdings
Consolidated foreign currency positions contributed 7.7 billion francs to the central bank’s profit in 2011, with interest income accounting for 5.5 billion francs, the SNB said. Franc positions had a net loss of 163 million francs in 2011, partly because of liquidity-absorbing repo operations.
A valuation gain on gold holdings contributed 5.4 billion francs to the result. The central bank will pay 1 billion francs to the federal government and the cantons.
The SNB will hold its next monetary policy assessment on March 15. The central bank is a joint-stock company in which public shareholders including cantons and regional banks have a stake of about 55 percent. Private individuals hold the remainder.
To contact the reporters on this story: Paul Verschuur in Zurich at pverschuur@bloomberg.net; Klaus Wille in Zurich at kwille@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
