Money For Members

How will the Swiss central bank’s ‘record loss’ impact you?

Helena Bachmann in Geneva
Helena Bachmann in Geneva - [email protected] • 10 Jan, 2023 Updated Tue 10 Jan 2023 15:24 CEST
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The SNB lost much more than this in 2022. Photo by Michele LIMINA / AFP

For the first time in its history, the Swiss National Bank (SNB) is expecting a ‘record loss’ totalling 132 billion francs in 2022. Should you be concerned?

Such a massive loss has not happened in wealthy and well-managed Switzerland since January 1906 — the year the central bank was founded.

In 2021, on the other hand, the bank reported a 26-billion-franc profit.
 
So what happened in the meantime?

Various factors contributed to this historic (so far) loss, including the downturn in global financial markets, which impacted SNB’s foreign-exchange holdings.

But we won't know for sure which reasons accounted for most losses until the detailed report is released on March 6th.

READ MORE: Swiss central bank faces record loss

How serious is this loss to Switzerland’s economy, and how could it affect you?

Unless you own shares in the SNB, this situation will not have direct repercussions on your finances. It could, however, impact you indirectly.

That is because the bank won’t be able to distribute its profits to the federal government and the cantons, as it usually does.

As this money supplements government budgets, it's not ruled out that some cantons would have to take cost-cutting measures, postpone tax cuts, and generally reduce public spending.

The Conference of Cantonal Finance Directors (FDK) described the failure of the profit distribution as "unpleasant," though the organisation did not seem surprised at this turn of events. 

“It is known that the SNB's profits fluctuate greatly and that distributions cannot be taken for granted," FDK said.

It is also unlikely that the loss will impact the country’s famously resilient economy in the long term.

According to an analysis on the Watson news portal, this money is “not really lost.”

"The minus is the so-called ‘book loss.’ This means that the value of the National Bank's portfolio can recover quickly as soon as share prices start to rise again."

And there is even some good news: while its currency positions took major hits, the bank gained 400 million Swiss francs on its gold holdings.

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Helena Bachmann in Geneva 2023/01/10 15:24

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