– Cantons demand new practice for SNB funds
From record-high sums to zero rounds: economists and finance directors want to renegotiate the agreement with the National Bank – there will soon be an opportunity to do so.
Published today at 9:41 p.m
“The mechanism does not work as hoped”: Laurent Kurth, finance director of the canton of Neuchâtel.
Foto: Laurent Gilliéron (Keystone)
Generating profits is not the aim of the National Bank. But if it makes profits, it has to distribute part of it to the federal government and cantons – and with a certain degree of consistency, as the National Bank Act states.
However, this consistency has not been far off in the current decade. Initially, the National Bank’s distributions climbed to record high amounts: in 2020, the federal government and cantons received 4 billion francs, and in 2021 and 2022 even 6 billion francs. In 2023, payments stopped abruptly and there was a zero round. In 2024, the federal government and cantons will again not receive any money.
The National Bank’s distributions have fluctuated significantly more since 2020 than in the previous two decades. At that time, between one and two and a half billion francs flowed to the federal government and cantons every year. Only in one year, 2014, did the public sector receive any money from the National Bank.
From the point of view of some cantons, it would be advisable to return to the previous regularity. “A certain level of stability in distributions would be desirable,” says Astrid Bärtschi, finance director for the canton of Bern. “That would make the preparation of annual budgets much easier.”
Agreement governs distributions
The distribution practice is regulated in agreements between the National Bank and the Federal Department of Finance. The last time such an agreement was signed was in January 2021. It provides for an annual basic amount of 2 billion francs. For every additional 10 billion francs that are available in the so-called distribution reserve at the National Bank, an additional billion can be paid out to the federal government and cantons – up to a maximum of 6 billion francs.
“The idea behind this mechanism was to achieve greater regularity in distributions,” says Laurent Kurth, finance director of the canton of Neuchâtel. «Today we have to realize that the opposite has been achieved. The mechanism doesn’t work at all as hoped.”
The fact that Neuchâtel, like all other cantons, will not receive any money this year is due to the record loss that the National Bank made in 2022. This was fully charged to the distribution reserve. This reserve, which had been full to the brim a year earlier, was pushed sharply into the red. This made distributions in 2023 and 2024 impossible. And in 2025, no money will likely flow to the federal government or cantons either, as the distribution reserve is currently in the red at 53 billion francs.
In order to receive money despite the negative distribution reserve, the federal government and the cantons could renegotiate the agreement with the National Bank. The opportunity to do this will soon arise, as the current agreement only applies until 2025 and the bodies involved at the federal government and the National Bank are in constant dialogue.
Philipp Rohr, head of communications at the Federal Department of Finance, confirms that the federal government is also concerned about maintaining distributions over the medium term. In the negotiations with the National Bank, “the effects of extreme events such as the loss in 2022 and the consequences of this on profit distributions should be discussed.”
Basel economics professor Yvan Lengwiler outlines one way to stabilize the distributions. The amounts could not be linked to the level of the distribution reserve, as is the case today, but could be calculated as a percentage of the National Bank’s balance sheet total. “In this way, the fluctuations in profit distribution would be significantly reduced.”
An agreement like the one that existed in the noughties would be even simpler. At that time, the National Bank simply transferred a fixed sum to the public sector: 2.5 billion francs. A performance-related distribution as it exists today was only agreed from 2011 following the financial crisis.
Controversial accounting
However, the National Bank could also change its practice on its own initiative. Lengwiler calls for this in a report that he published with two colleagues in the group “The SNB Observatory”. They describe the provision policy as “arbitrary” and suggest that in the event of a loss, the National Bank should not charge the distribution reserve, but rather its general reserves. These so-called “provisions for currency reserves” currently amount to 113 billion francs. They are increased by 10 percent annually by the National Bank – regardless of whether it makes a profit or loss.
According to Lengwiler’s assessment, the National Bank has enough money to pay out 6 billion francs this year. To forego this would mean depriving the people of part of their wealth.
The National Bank itself sees this differently. She counters that her equity capital (i.e. the sum of the distribution reserve and the provisions for currency reserves), at around 63 billion francs, is not at the level that the National Bank is aiming for: 10 percent of the balance sheet total or around 80 billion francs. For this reason, further funding of the provisions for currency reserves is necessary.
The National Bank is thus underlining its position that the public sector is not entitled to any further money from its reserves for the time being. Only an unexpectedly high profit in 2024 – or political intervention by the federal government and cantons – could change this in the short term.
Simon Schmid is an editor in the economics department. He studied sociology and economics and teaches data journalism at the MAZ Lucerne and the FHNW. Bluesky: @simonschmid.proMore information@schmid_simon
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