SNB profit, a tale of currency movements
Zurich, Switzerland (GenevaLunch) – A net profit of CHF1.9 billion for the first three months of 2011 at The Swiss National Bank was due largely to currency fluctuations, the central bank said Friday 29 April. The net result from foreign currency positions was CHF1.6 billion, while losses from Swiss franc holdings were CHF106 million.
Euro appreciation led to exchange rate gains
The bank says that the Swiss franc depreciated against European currencies from January to 31 March, ” leading to exchange rate gains, especially on euro holdings. A depreciation in the US dollar and the yen, however, meant that the overall exchange rate gain amounted to CHF 2.4 billion. A slight rise in interest rates depressed prices of interest-bearing instruments by CHF 2.9 billion. Interest income on these securities of CHF 1.4 billion and price gains on equity securities of CHF 0.6 billion were not sufficient to offset the fall in prices.”
Gold contributed little, UBS loan repayments reduce risk
This one is made of chocolate but real shoes cost more in March, as new models replaced February sale items
Zurich, Switzerland (GenevaLunch) – Swiss consumer prices rose 0.6 percent in March 2011, according to the latest CPI (consumer price index) figures released Wednesday 6 April by the Federal Statistics Office. Year-on-year inflation was 1.0 percent.
The annualized rate in February was 0.5 percent.
The main contributors to the rise in inflation were petrol prices, up 4.9 percent and new clothes and shoes hitting the stores after the sales, with an 8.5 percent increase in prices compared to February.
The Swiss franc continues to remain high against other major currencies, but according to Swiss National Bank (SNB) board member Jean-Pierre Danthine, interviewed by Basler-Zeitung shortly before the latest inflation figures were published, the Swiss economy is largely immune to the currency situation, with the very low interest rates providing domestic benefits. The European Central Bank will announce 7 April if it is raising interest rates and the SNB says it is closely watching international developments, one of the greatest risk factors for the Swiss economy.
Related stories: Reuters, preface to the 2010 Annual Report of the SNB, published 7 April 2011
Philipp Hildebrand, president, Swiss National Bank
Bern, Switzerland (GenevaLunch) - The case of Switzerland will give economists material to mull over, with Swiss exports showing a surprising leap in February, increasing by 10 percent. The machine industry and electronics led the way, with 20 percent growth.
Imports grew, but more “timidly” says the federal government.
Switzerland now shows a positive trade balance of CHF2.5 billion, double what it was a year earlier, and this despite concerns about the strong franc in recent months.
Philipp Hildebrand, Swiss National Bank (SNB) president, speaking to a group of journalists in Geneva Tuesday noon qualified Swiss exports as “remarkably resilient” but he warned that the Swiss economy will eventually see growth slow down as a result of the impact of the Swiss franc. The SNB 17 March revised upwards to 2 percent its forecast for growth of the Swiss economy in 2011, cautioning at the time that growth will slow down by 2012 due in part to the strong franc.
Hildebrand points to three risk areas for the Swiss economy: the high Swiss franc, the uncertain situation in the Middle East and the problems created by the earthquake and tsunami in Japan.
Bloomberg reports Tuesday that the Swiss franc “gained 12 percent over the last year versus the euro, the currency of its main trading partner, eroding exporters’ competitiveness. Against the dollar, it reached a record 88.52 centimes per dollar on March 17.”
Dollar weakens against the Swiss franc
The Swiss franc reached another historic high against the US dollar in trading Tuesday, 15 March, as the dollar slipped below CHF0.92.
The Japanese yen also traded close to historic highs as Japanese firms appear to be bringing finance back to Japan to help firms deal with the problems caused by the massive earthquake and tsunami.
The Swiss franc benefited from its traditional role as a safe have in times of uncertainty and from the sound economic performance of the Swiss economy.
Switzerland has low inflation, a current account surplus, a balanced budget and comparatively low national debt.
The Swiss National Bank announces its interest rate policy Thursday 17 March and analysts are expecting rates to be kept near zero.
SNB cash distribution will be concentrated in Bern and Zurich
Geneva, Switzerland (GenevaLunch) – The Swiss National Bank will close its Geneva money-distribution operation at the end of January 2012, the central bank announced Wednesday 2 March, to concentrate the service in Bern and Zurich. The SNB also works with 13 agencies operated by cantonal banks to ensure an adequate supply of coins and bills in Switzerland.
The volume in Geneva is not great enough for the system to operate efficiently, the SNB says.
Fifteen employees will be affected but the bank hopes to avoid redundancies through early retirement or internal re-assignment.
The SNB will continue to maintain a presence in Geneva with its delegate for regional economic relations.
Bern, Switzerland (GenevaLunch) – Switzerland’s financial system managers have set up a financial crisis unit: the federal finance ministry, the central bank and the bank supervisory body Finma have signed an MOU (memorandum of understanding) in line with a 2010 directive from the government in the wake of the global financial crisis.
The steering committee for the unit will meet at least once a year to create a set of crisis management tools and “as often as necessary” in the event of a crisis. The new committee will be relatively autonomous, with the head of the Federal Department of Finance responsible for deciding on the timing of informing the full seven-member ruling Federal Council of the need to take measures, but he or she must inform them immediately when “risk assessment reveals the likelihood of exceptional measures having to be taken by the authorities”.
Losses in future years could touch shareholder gov’ts budgets
The SNB has head offices in Bern, shown, and Zurich
Update 11:45 Zurich, Switzerland (GenevaLunch) – The Swiss National Bank (SNB) is likely to post a CHF21 billion loss for 2010 as the result of exchange rate losses of CHF26m, it announced Friday.
But the federal government and cantons will receive their expected share of profits and dividends so their planned budgets will not have to be cut.
The SNB loss was softened by a CHF6b gain in the value of gold holdings. The central bank in 2009 has a profit of CHF10b. The bank notes that “despite the reduced allocation to the provisions for currency reserves, the SNB’s capital base continues to be robust, also by comparison with other central banks.”
The bank builds long-term equity capital by allocating money every year to the provisions for currency reserves.”The events of the past year have highlighted the fact that an adequate capital cushion is paramount for monetary policy independence. The SNB will therefore continue to pursue its long-term strategy of increasing its equity capital on an annual basis by means of allocations to the provisions for currency reserves.”
Swiss current account surplus rises to CHF21b, while franc reaches record against euro
Q3 2010 Swiss Balance of Payments: SNB
Zurich, Switzerland (GenevaLunch) – Switzerland finds itself, as 2010 draws to a close, in the unusual position of having a growing current account surplus that stands at CHF21 billion for the third quarter while the Swiss franc reaches a record against both the euro and the dollar.
The current account shows an increase of CHF6 billion in receipts from direct investments outside the country, but trade in goods and services contracted by CHF1b, leaving the current account surplus at CHF5b higher. The Swiss franc’s rise would normally be expected to put a stronger dent in the balance of trade.
Safe haven franc hits record highs against dollar, euro
The Wall Street Journal reports Thursday early afternoon that “the euro fell below 1.24 Swiss francs for the first time, while the dollar and the pound both printed new record lows against the safe-haven currency of 0.9371 francs and 1.4550 francs, respectively.”
The exchange rates are generally somewhat exaggerated at year-end by light trading, which emphasizes movements, and this year the overall weakness of the dollar is a special factor, but during 2010 the franc has appreciated 9 percent against the dollar and 18 percent against the euro.
Foreign companies moving head offices to Switzerland inflate figures
The Lake Geneva region is drawing a growing number of foreign companies for their head offices
Zurich, Switzerland (GenevaLunch) – Switzerland, which has one of the world’s highest net international investment positions (IIP) in relation to GDP, saw this climb back nearly to 2007 levels in 2009. Its net position rose by CHF95 billion to CHF764b in 2009. Foreign assets climbed by CHF95b to CHF 3,177b. Assets “were still considerably below the level of 2007″, says the Swiss National Bank (SNB).
The figures were released Tuesday morning 14 December by the SNB.
Net IIP is the difference between a country’s external financial assets and liabilities. IIP equals domestically owned foreign assets and foreign owned domestic assets.
“In relation to GDP, the 2009 net investment position increased from 123 percent to 143 percent year-on- year—a very high figure by international standards. At the end of 2007, this key figure was 149 percent,” the SNB notes in its press release. Hong Kong traditionally has a very high figure, above 300 percent, while the United States, for example, was -24 percent, Ireland -58 percent and Greece -75 percent in 2008.
Foreign companies account for nearly half of direct investment Read more…
Real estate and recovery in share prices account for improvement
Zurich, Switzerland (GenevaLunch) – Per capita net worth for Swiss households rose to about CHF333,000 in 2009, up from CHF316,000.
Home values rose in Switzerland in 2010
Housing prices and a recovery in share prices have brought Swiss household income back up to the level of 2007, before the 2008 global economic crisis, figures published Friday 19 November by the Swiss National Bank show. Financial assets held by households grew 8.7 percent in 2009, up CHF151 billion to CHF1,883 billion.
“Movements in financial assets were strongly influenced by rising stock market prices: roughly one-third of the price losses suffered in 2008 was recouped in 2009 on stock markets in Switzerland and abroad,” the central bank notes in a statement. The stock market improvement resulted in the value of household shares rising by CHF43 billion to CHF212b. The value of collective investment schemes climbed by CHF19b to CHF181b.
Pension funds see contributions outweigh benefits drawn
Pension funds, too, saw an improvement: contributions to occupational pension schemes exceeded the benefits drawn and price gains were recorded on pension fund investments, says the SNB.
More home buyers and rising apartment prices account for higher real estate value
First three quarters 2010 show CHF8.46b loss due to foreign currency holdings
UBS bailout fund “positive”
A fistful of dollars isn't what it was a year ago, same for euros
Zurich, Switzerland (GenevaLunch) – The Swiss National Bank (SNB) has posted a loss of CHF8.46 billion for the first nine months of 2010, due largely to its foreign currency holdings. Exchange rate losses totalled CHF21.2b during the first three quarters, with the euro trading 10.3 percent lower than at end-2009 and the US dollar falling 5.4 percent in the same period.
A year earlier the SNB showed a CHF6.89b profit for the same period.
The loss is before allocation to provisions for currency reserves, which the SNB is required to set up to maintain currency reserves at a level needed for monetary policy.
Bern, Switzerland (GenevaLunch) - Switzerland’s two biggest banks, UBS AG and Credit Suisse Group, need to increase their capital reserves beyond international standards, said on 4 October, a committee of public-private experts appointed by the Swiss Federal Council to address the issue of “too big to fail.”
The Committee of Experts believes that both banks are indeed “too big to fail,” but that measures should be put in motion to prevent any possible collapse (not only of the banks but of the Swiss economy).
The new proposal, backed by the Swiss National Bank, SNB, and the country’s financial regulator Finma; goes beyond the Basel III rules agreed to last month by the 27 member countries of the Basel Committee on Banking Supervision.
The Basel III rules establish reserves of 7 percent in common equity and 10.5 percent in total capital, while the new proposal require much higher reserves by 2019; 10 percent and 19 percent respectively.
The committee also proposed specific oversight measures in core areas including liquidity, risk diversification and organisation.
SNB revises 2010 Swiss and euro region growth forecasts upwards
Inflation rise will be lower than earlier forecast
A place of one's own (here: Cologny, Geneva), mortgage market mostly unchanged
Ed. note: the dollar rose to CHF1.01 and the euro to CHF1.32 in late Thursday trading against the franc.
Update 16:55 Zurich, Switzerland (GenevaLunch) – The Swiss National Bank (SNB), like the federal government’s group of experts, has raised its forecast for the Swiss economy, saying Thursday 16 September that it expects 2.5 percent GDP growth for 2010, while noting that 2011 will be less rosy. At the same it revised downwards its inflation forecast for the next three years, and it has left interest rates unchanged.
It is leaving the target range for the three-month Libor unchanged at 0.00–0.75 percent and says it intends to keep the Libor within the lower part of the target range at around 0.25 percent.
The Swiss franc rose Wednesday on speculation the SNB would tighten its current expansionary monetary policy and raise interest rates.
SNB September 2010 inflation forecast, Switzerland
On the Swiss mortgage front the bank says “most banks report unchanged lending conditions and a further increase in demand. The growth in mortgage lending and real estate prices has decelerated marginally, compared to the situation at the end of 2009.” The household mortgage situation still requires close watching, it suggests.
Swiss National Bank, Bern (head offices in Bern and Zurich)
Zurich, Switzerland (GenevaLunch.com) – Walter Meier, deputy economics editor at Zurich daily newspaper Neue Zürcher Zeitung, has been named the new media spokesperson for the Governing Board of the Swiss National Bank (SNB). The new position, effective January 2011, is part of a planned expansion of the central bank’s communications programme, and comes at a time when the Swiss franc is at an all-time high against the euro.
The SNB earlier this year followed a policy of intervention to keep the franc’s rise in check as investors sought a safe-haven currency during the global economic crisis. In recent weeks the SNB has stepped back, allowing the franc to rise, to the consternation of Swiss industry, for whom a higher franc causes export problems. The central bank issues regular reports about its currency activities, but the Governing Board is traditionally reticent about its policies and its relationship with the government.
UBS fund and higher gold prices help Swiss central bank
Losses less than anticipated
Zurich, Switzerland (GenevaLunch.com) – The Swiss National Bank, SNB, losses reached CHF2.8 billion in the first half of 2010, much less than the CHF4 billion estimated in July 2010.
According to an SNB statement released on 13 August, the appreciation of the Swiss franc against the euro resulted in exchange rate losses of its currency reserves totalling CHF14.3 billion.
The price of gold had the opposite effect resulting in valuations gains of CHF6.8 billion. In addition, Switzerland’s central bank profit from a CHF1.3 billion UBS fund that holds toxic assets from Switzerland’s largest bank, acquired as part its 2008 bailout.
Switzerland holds 1,040 tonnes of gold in the form of currency reserves.
Swiss banks’ stress tests shows “both banks would still have a solid capital base” in case of global recession
Basel, Switzerland (GenevaLunch.com) – Credit Suisse and UBS, Switzerland’s two large banks, would both have capital ratios of at least 8 percent, should they be subject to stresses from a global economic recession, Finma, the country’s financial regulatory body, said Friday evening 23 July.
Finma published the results of its stress tests on the two banks, conducted since 2008, in parallel with announcements by the European Union and 91 of its largest banks about the results of EU bank stress tests.
Seven of the 91 European banks failed the stress tests, five “caja” or savings banks in Spain, Germany’s Hypo Real Estate and Greece’s ATE bank, a result that led, according to the Financial Times, to investors signalling “their distrust of the assumptions underlying the tests and the surprisingly small number of banks to fail the tests.”
Finma explained in publishing its results that the stress tests were developed with the Swiss National Bank, the country’s central bank. “Analyses of this kind are a key component of its normal supervisory activities. Finma requires Credit Suisse and UBS to have sufficient excess capital and liquidity to enable them to absorb unforeseen events at any time. The large banks should therefore have a tier 1 ratio of at least 8 percent even under such stress scenarios. If this requirement were not met, Finma would work with the institution in question to consider reducing its risk positions and/or strengthening its capital base and then instruct suitable measures.”
The stress tests check the banks’ capacity to deal with specific scenarios. “The latest scenario covers different regions of the world over a two-year period. It assumes a global recession, accompanied by a slump in prices on the financial and real estate markets,” Finma says in its press release. “Developments in Europe have also been added, with specific and very sharp shocks assumed for some European countries. In view of UBS and Credit Suisse’s relatively low exposure to these countries, however, the impact of these particular shocks turns out to be small.”
UBS stabilization fund not included: will make “significant positive contribution”
Zurich, Switzerland (GenevaLunch.com) – The Swiss National Bank expects a CHF4 billion loss for the first half of 2010, it announced Tuesday morning 21 July. The loss is the result of its active role in foreign currency markets from January to June, with CHF132b invested in other currencies.
The bank says in a press release that “the bulk was placed in euro-denominated investments. The sharp appreciation of the Swiss franc, in particular against the euro, resulted in exchange rate losses of over CHF 14 billion.”
The loss was, however, limited by the steep rise in the price of gold, which has risen about 12 percent since January, and a stronger Swiss franc. The definitive figures will be released 13 August 2010.
Zurich, Switzerland (GenevaLunch) – The Swiss National Bank ended the first three months of the year with a
consolidated profit of CHF1.5 billion, with gold pulling the balance sheet up and exchange rates tugging it down. The rising price of gold accounted for CHF1.3b of the profit, while currency losses, notably the fall in the euro, accounted for a loss of CHF2.46 million.
The stabilization fund that was part of the UBS bank bailout in late 2008 was reduced by CHF2.6m to CHF17.7m, and it contributed CHF921m to the overall profit for the period.
Gold continues its climb to record prices this week, and the Swiss franc reached a new high against the euro in trading Friday morning.
Links to other sites: CS Monitor, Reuters
Zurich: ready to shop again
Zurich, Switzerland (GenevaLunch) - The Swiss franc rose against most other currencies Tuesday 11 May, while the euro wobbled: a rise in Swiss consumer confidence boosted the Swiss currency, while doubts surfacing in the wake of the eurozone bailout weakened the euro. The franc has been steadily appreciating against the euro, with the Swiss central bank intervening since March to keep the price from rising too rapidly. It was trading at 1.41 at the end of the day. Six months ago it was at CHF1.50 to the euro.
Spot gold also rose, to its highest price since the Lehman Brothers collapse in 2008: $1,232.40 a troy ounce, as investors appeared to seek safe havens.
Philipp Hildebrand, chairman of the Swiss National Bank, opened a high-level meeting of international monetary system expertsin in Zurich Tuesday. He remarked that “discontent with what is often perceived as excessive exchange rate volatility has been an important source of dissatisfaction with the present international monetary system. What constitutes excessive exchange rate volatility, and whether domestic policies or the international monetary system are at the root of it, is a matter of legitimate debate.”
Historical exchange rate graph, Swiss franc/euro, November 2009 to May 2010
Links to other sites: AFP, Bloomberg/Business Week, Financial Times
Swiss franc rises against dollar, euro
Zurich, Switzerland (GenevaLunch) – The Swiss National Bank Thursday 6 May has reportedly called a halt to the purchase of euros it has appeared to be making for some days. The SNB had been intervening to keep the euro above CHF1.43, possibly because of a 0.9 percent increase in the consumer price index in April, according to analysts questioned by the Financial Times and Reuters. The euro fell by 2 percent in just minutes earlier Thursday to CHF1.41, its weakest point against the franc since the euro was created.
The euro fell to a 14-month low against the US dollar, to $1.2736 on news that the European Central Bank would not offer “new measures to ease the Greek crisis”, Reuters reports.
Meeting at Swiss central bank 11 May will bring together bank governors, policy-makers
Zurich, Switzerland (GenevaLunch) – The Swiss National Bank and the International Monetary Fund will co-host a meeting 11 May in Zurich that will bring together top-level participants in the international monetary system to review its weaknesses and identify areas that need reform.
The conference will “provide an opportunity to exchange ideas on a number of related topics, including sources of instability in the international monetary system, improving the supply of reserve assets, dealing with volatile capital flows, and possible alternatives to countries’ accumulation of reserves as self-insurance against future crises,” the two announced Tuesday 27 April.
Swiss francs reaches record high
Zurich, Switzerland (GenevaLunch) – The Swiss franc reached 1.4233 against the euro Wednesday, a record high. Economists interviewed by several publications indicate that the euro is likely to continue to slip to CHF1.40 before the Swiss National Bank (SNB) intervenes. The European Union is Switzerland’s largest trade partner and although exporters are watching the situation closely an impact on exports is not yet having a clear impact. The euro continues to be hit hard by uncertainty over Greece’s economic situation.
Zurich, Switzerland (GenevaLunch) – The Swiss National Bank ended 2009 with a profit of CHF10 billion, in line with estimates published 21 January. The bank attributes the turn-around from a CHF4.7b loss in 2008 to “substantial valuation gains amounting to CHF 7.3 billion on gold holdings and interest income on foreign currency positions.” The SNB financial results are published as part of consolidated statements that include the annual financial statements of the parent company and the UBS stabilization fund. “Taking into account the UBS equity contribution, the stabilisation fund showed a loss of approximately $400 million at 31 December 2009. This was fully covered by the SNB option for 100 million UBS shares at nominal value.”
New Swiss bank notes delayed to 2012
Zurich, Switzerland (GenevaLunch) – New bank notes for Switzerland will not come out until 2012, instead of autumn 2010, as originally planned. Security features to be added will require additional development and testing time, says the Swiss National Bank (SNB). The high level of security for the current bank notes means there is no urgency, it argues. Switzerland will keep the colours and denominations of the notes currently in circulation, but the new ones will be slightly smaller.
Links: SNB security features on Swiss bank notes, design details of Swiss bank notes, contest new bank note designs by Manuela Pfrunder, who was awarded the job (note: the new notes will not look like these)
Bern, Switzerland (GenevaLunch) - The finance commission of the Swiss Parliament’s lower house agreed Thursday 21 January to set up a special investigative commission to review decisions made by Swiss authorities concerning UBS. The new commission will review decisions made by the Swiss Federal Council, the Swiss National Bank and Finma, the financial system supervisory body, in three areas: the UBS bailout in the contect of the financial markets crisis, changes to supervisory regulations covering UBS and the decision by Finma for UBS to release client data to US tax authorities.
Zurich, Switzerland (GenevaLunch) – The Swiss National Bank expects to see a “large profit” of CHF10 billion for 2009, thanks to the rapid rise in the price of gold and currency fluctuations during the year. The valuation of the gold holdings of the central bank rose by CHF7.3 billion during the year, with the price of gold moving between about $800 and $1,200 an ounce (chart).
The bank’s foreign currency positions brought in another CHF2b.
The profits are shared in part with the federal and cantonal governments, some CHF2.5b.
Bern, Switzerland (GenevaLunch) – The Swiss government is not likely to introduce a special tax on Swiss banks, the Swiss Federal Department of Finance (FDF) says. It has taken note of US President Barack Obama’s intention to introduce a special levy on the 50 largest financial institutions in the USA in order to recover some $90 billion over 10 years, but it says that Switzerland’s financial system bore up well during the crisis and no public funds were lost.
Swiss National Bank's Philipp Hildebrand
Zurich, Switzerland (GenevaLunch) – Philipp Hildebrand has been the chairman of the Swiss National Bank’s three-man governing board since 1 January 2010. In an interview with Geneva’s Le Temps published 17 January, he expounds on several of the issues facing the central bank today.
Relatively upbeat on Swiss economy
Hildebrand is moderately optimistic about Switzerland’s economic prospects for the coming year. The pace of inflation will determine the rate at which monetary policy is normalized over the coming months, he says. As to the risk of inflation getting out of hand, Hildebrand says that the independence of the world’s central banks is the best insurance against the temptation by governments to inflate their way out of huge public debts.
Zurich, Switzerland (GenevaLunch) - The Swiss franc reached €1.50 for the first time since March 2009 Friday 18 December, and it rose against the US dollar to 1.04. The move prompted observers to ask if the Swiss National Bank has stepped back from its policy, in place for more than six months, to weaken the franc.
Links to other sites: Bloomberg, Reuters, Swiss National Bank
Zurich, Switzerland (GenevLunch) – Interest rates will stay low, continuing the policy of monetary expansion, Switzerland’s central bank announced 10 December. The Swiss National Bank argues that the economic recovery is still too fragile to warrant a rise in interest rates which will remain in a range of 0-0.75 percent for the three-month Libor. The bank says it will keep rates at the lower end of this band, and will intervene decisively to maintain the Swiss franc stable against the Euro.
It also announced it was suspending its purchases of Swiss franc bonds issued by private sector companies, a measure introduced to provide the market with liquidity.
