Why has Switzerland's central bank made a loss of 3 billion francs?
Switzerland's central bank expects to have logged a loss of 3 billion francs ($3.5 billion) last year but why and what does this mean for Switzerland?
The steep loss by Switzerland's central bank is down to the fact that it was hit by its own interest rate hikes.
The loss means the country's government and cantons will not receive their annual pay-out from the Swiss National Bank (SNB) for a second year in a row, it said. The 3 billion loss is dwarfed by the 132 billion franc-loss the central bank reported in 2022.
Like other central banks worldwide, the SNB has raised its interest rates out of negative territory in efforts to tame inflation.
This meant that the SNB had to pay interest to banks parking their money at the central bank.
Previously, it was the banks that had to pay interest on the money they had to deposit at the SNB, as the rates were in negative territory.
The SNB said it had a loss of 8.5 billion francs on national currency positions last year. It made a profit of 4 billion francs on foreign currency positions.
Its gold holdings recorded a valuation gain of 1.7 billion francs.
How will this loss 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.
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The steep loss by Switzerland's central bank is down to the fact that it was hit by its own interest rate hikes.
The loss means the country's government and cantons will not receive their annual pay-out from the Swiss National Bank (SNB) for a second year in a row, it said. The 3 billion loss is dwarfed by the 132 billion franc-loss the central bank reported in 2022.
Like other central banks worldwide, the SNB has raised its interest rates out of negative territory in efforts to tame inflation.
This meant that the SNB had to pay interest to banks parking their money at the central bank.
Previously, it was the banks that had to pay interest on the money they had to deposit at the SNB, as the rates were in negative territory.
The SNB said it had a loss of 8.5 billion francs on national currency positions last year. It made a profit of 4 billion francs on foreign currency positions.
Its gold holdings recorded a valuation gain of 1.7 billion francs.
How will this loss 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.
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