On Monday, the Swiss National Bank revealed a substantial annual loss of 3.2 billion Swiss francs ($3.62 billion). The loss was attributed to the significant cost incurred due to the shift to positive interest rates.
The central bank incurred an 8.5 billion franc loss on its Swiss franc holdings primarily because it paid interest on the sight deposits it maintains for commercial banks overnight. Consequently, this led to a significant financial setback.
In September 2022, the SNB shifted from a protracted era of negative interest rates to positive rates to combat surging inflation. Since June of last year, the policy rate has stood at 1.75%.
Despite the considerable impact on earnings and valuation gains from its stock and bond portfolio due to the Swiss franc’s appreciation during the year, the SNB managed to turn a profit of 4 billion francs from its foreign currency positions. This success underscores the resilience and strategic management employed by the Swiss National Bank in navigating currency fluctuations. Despite challenges, the SNB demonstrated its ability to optimize foreign currency positions for profitability.
Additionally, the central bank saw a 1.7 billion franc gain in value on the 1,040 tonnes of gold it now owns.
The SNB’s tentative forecast from January was verified by the 2023 outcome. The central bank reported an improvement over the record 132.5 billion franc loss in 2022.
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