Surging franc pushes SNB into the red

Surging franc pushes SNB into the red

The Swiss National Bank has announced a consolidated loss of Sfr.10.8 billion for the first half of 2011 largely as a result of the surging value of the Swiss franc.

The bank lost Sfr.9.9 billion on its foreign exchange holdings alone in the first six months of the year.

The Swiss currency, regarded as a safe haven in turbulent times, has risen by 33 percent against the US dollar and 20 percent against the euro over the past 12 months.

This has reduced the value of SNB’s foreign exchange holdings which it had accumulated in 2009 and 2010 in a bid to stave off deflation by intervening in the markets.

“The appreciation of the Swiss franc against all major investment currencies resulted in substantial valuation losses,” the SNB said in a statement issued on Friday.

The losses at SNB could have political ramifications as the country’s 26 cantons rely on dividends from the bank to help finance their budgets.

Christoph Blocher of the right-wing Swiss People’s Party (SVP) had previously called on the bank’s chairman, Philipp Hildebrand, to resign when the SNB announced losses of Sfr.26 billion for 2010 due to its foreign currency positions.

Switzerland goes to the polls in October and the SVP looks likely to hold onto its position as the biggest party in the lower house of parliament.