World Economy

SNB Pledges Payout Despite $23b Loss

SNB Pledges Payout Despite $23b LossSNB Pledges Payout Despite $23b Loss

The Swiss National Bank has announced that it anticipates a CHF23 billion ($23.10 billion) loss in 2015 but pledged to maintain dividend payments and ordinary profit distributions to its shareholders, suggesting that it expects the CHF exchange rate to stabilize.

The central bank is privately owned, with the majority of shares belonging to cantons and banks cantons, consequently, a dividend cut would have had a significant impact on the Swiss canton budgets, Investment Europe reported.

SNB anticipates that its loss on foreign currency positions to be around CHF20 billion in 2015, in addition, the central bank also booked a CHF4 billion loss on its gold holdings and CHF1.4 billion to the provision of currency reserves.

Despite the annual total loss and allocation amounting to CHF24.5 billion, the results remain below the SNB’s distribution reserve of CHF27.5 billion. With the allocation of CHF15 ($16.38) dividend per share and an ordinary profit distribution of CHF1 billion, the distribution reserve remains now at a mere CHF2 billion.

Following the abandonment of the fixed exchange rate between euro and CHF in January 2016, foreign exchange markets responded with a steep appreciation pressure on the franc, which took the role of a safe haven currency.

In the first half of 2015, the SNB has booked more than CHF50 billion losses, consequently, the annual loss of CHF23 billion represents a gradual improvement of the CHF exchange rate. Despite stock market volatility in China, the franc remained stable against the euro.

 Franc May Stagnate

The Swiss franc is likely to hold steady or ease this year, SNB Chairman Thomas Jordan said in an interview with Swiss radio SRF on Saturday.

He cautioned, however, that the franc’s safe haven status “means that, when uncertainties arise, the franc can be in demand.”

Almost exactly one year ago, Switzerland’s central bank shocked financial markets by abandoning a cap of 1.20 francs per euro it had defended for more than three years to shield the export-oriented economy from the pain of an overvalued currency.

“We expect the franc to stay on its (current) level or to weaken slightly,” Jordan said in reply to a question about his expectations for the Swiss economy in 2016.

“If the franc weakens a lot, that would be very good for the economy, exports would be much better and growth would accelerate. If the franc appreciates, it will go the other way,” he said in an interview with the Samstagrundschau program.

In December 2014, the SNB introduced negative interest rates, a move Jordan defended in a separate interview with Swiss television on Friday.

“We introduced negative interest rates and we are ready to intervene in the forex market. Both measures together should relieve the pressure on the franc and help the franc weaken further over time,” Jordan said.