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Swiss National Bank reports $3.62 billion loss in 2023!!


SNB reports $3.62 billion loss in 2023

The Swiss National Bank (SNB) reported a significant financial loss for 2023, totaling 3.2 billion Swiss francs (approximately $3.62 billion). This loss was primarily due to the shift from negative to positive interest rates, which also led to the inability to pay dividends for the second consecutive year. The SNB joined other central banks, such as those in Germany and the Netherlands, in experiencing losses due to higher interest rates aimed at combating inflation.


The German central bank disclosed a substantial loss of 21.6 billion euros in the previous year, which nearly depleted its financial reserves. Similarly, the Dutch central bank reported a loss of 3.5 billion euros. These losses reflect a broader trend among central banks in the context of the global economic climate and monetary policy adjustments.


For the SNB, the profits from its gold reserves and the interest received from emergency loans, particularly those associated with the Credit Suisse rescue, were insufficient to counterbalance the costs incurred from its tighter monetary policy. The bank had abandoned negative interest rates in 2022, subsequently introducing an interest rate of 1.75% paid to commercial banks for overnight deposits.



Despite a reduction in sight deposits recently, these still amounted to a significant 478.5 billion francs, according to the latest data. The SNB's stringent monetary policy has been effective in controlling inflation in Switzerland, with the country experiencing much lower inflation rates compared to its neighbors. The latest figures indicate a 1.2% increase in Swiss prices in February, the slowest growth in over two years.


The SNB's financial performance was further impacted by the strengthening of the Swiss franc last year, a consequence of higher interest rates and lower inflation in Switzerland. The bank's profits from its nearly 700 billion francs in foreign bonds and stocks were diminished, with only 4 billion francs in profits recorded after accounting for dividend, interest, and valuation gains, which were offset by significant losses due to exchange rate fluctuations.


The 2023 financial outcome, which aligns with the SNB's initial forecast made in January, marked an improvement from the record loss of 132.5 billion francs in 2022. However, it was still insufficient for the bank to distribute dividends to its shareholders or to the Swiss central and regional governments, marking the second consecutive year without dividend payments. This situation has only occurred three times in the past 32 years.



Despite these losses, experts believe that the SNB's monetary policy will remain unaffected. Thomas Jordan, the Chairman of the SNB who recently announced his departure, is expected to reveal the latest interest rate decision on March 21. Economists like Karsten Junius from J.Safra Sarasin emphasize that the SNB's monetary policy has been successful, particularly in bringing Swiss inflation back within the target range more rapidly than other major central banks.


In 2023, the SNB generated a profit of 4 billion francs from its foreign currency positions and a valuation gain of 1.7 billion francs on its 1,040 tonnes of gold reserves. Additionally, the bank profited 1.4 billion francs from the 168 billion francs in emergency loans provided to facilitate the acquisition of Credit Suisse, with most of these loans now repaid as reported by Reuters.


04.03.2024



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