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Cheaper gold inflates Swiss central bank loss

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Cheaper gold inflates Swiss central bank loss
Photo: The Local
10:37 CET+01:00
Switzerland's central bank said on Monday that it expects to post a loss of around nine billion francs ($9.94 billion) for 2013, largely due to a significant decline in the value of its gold holdings.

The Swiss National Bank said in a news release that from provisional calculations it expects to lose 15 billion francs from its reserves of bullion, which has recently tumbled in price.

As a result of the anticipated loss, the SNB said it would not be able to pay its usual dividends to the cantons for the first time in more than a century.

The red ink compares with a profit of 6.9 billion francs in 2012 and 13.1 billion francs in 2011.

The loss in gold value in 2013 more than offset the 5.3 billion francs the central bank has in its distribution reserve fund, plus gains of around three billion francs each from currency transactions and the sale in November of its StabFund to UBS.

The stabilization fund was established in 2008 to take billions of francs of toxic assets off the books of Switzerland’s largest bank as part of a rescue package coordinated with the federal government.

The assets subsequently turned profitable and UBS, having recovered from the worst corporate loss in Swiss financial history, was able to buy them back from the SNB.

The central bank is also setting aside three billion francs for its currency reserve, leaving a 12-billion-franc hole overall in its accounts.

The upshot for the federal and cantonal governments is they will collectively lose a billion francs in revenue.

Under an agreement signed in 2011 between the BNS and the federal department of finance, the governments share this amount, provided that the central bank’s distribution fund is sufficient to offset losses.

The annual profit distribution was previously 2.5 billion francs.

The SNB has been distributing a share of its profits to the Swiss cantons ever since its creation in 1907, and to the Swiss Confederation since1991.

The central bank is set to release detailed final figures for 2013 on March 7th, while its annual report will be published on March 25th.

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