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The Swiss National Bank’s first estimate indicates that its operating loss for 2023 is in the order of 3 billion francs (around 3.23 billion euros at current exchange rates). It is a decidedly more contained red than the large one of 2022, which was 132 billion francs, but it is still a red and therefore the Swiss central institute this year too will be unable to pay money to the Confederation and Cantons, nor give dividends to private shareholders.
The SNB is controlled by the cantons, but is listed on the Zurich Stock Exchange. The institute’s mandate is to ensure price and currency stability. Making profits is not officially its job, but in Switzerland we have become accustomed to the fact that the SNB often makes profits and distributes them. An agreement provides that the institute, in the event of profits, makes substantial payments to the Confederation, as well as to the Cantons. In the last twenty financial years, including 2023, the institute has closed its annual accounts thirteen times with profits and seven times with losses. What also attracts attention is the unusual fact that the SNB this time made a loss for two consecutive years.
The cross-section
In 2023, the profit on foreign currency positions was around 4 billion francs. A capital gain of 1.7 billion emerged from the gold reserves. On franc positions, however, there was a loss of 8.5 billion. To frame the latter it is necessary to go back to the relevant interest rates-inflation-strong franc trend. After having maintained negative rates for a long time to slow down a franc which, when it strengthens too much, hinders Swiss exports, with the rise in prices that began in 2022 the BNS changed its line and increased rates, thus letting the franc rise to act as a barrier against the importation of inflation.
The inflation issue
By doing so, the SNB has effectively kept inflation low in Switzerland, but has inevitably had to pay more money to the banks that deposit funds with it; this contributed to the weighting of franc positions. Furthermore, the increases in the Swiss currency have brought about a decline in the values of foreign currency positions (lightened with sales, but still significant). If we add to all this that in 2023 the bond markets did not give the same satisfaction as the stock markets (the SNB is a strong investor in both), the picture is complete.
The institute naturally also has to take care of the provisions. The amount attributed to those for monetary reserves is 10.5 billion. Bearing in mind that the reserve for future distributions is negative for 39.5 billion, the budget loss (of the operating loss, which is more important, as mentioned above) is around 53 billion. At the end of 2023, equity capital was around 63 billion, compared to a balance sheet close to 800 billion.