SNB Looses $10 Billion on Gold Prices

by on January 7, 2014 4:56 am BST


The Swiss National Bank (SNB) will take a $10 billion loss, 9 billion francs, due to the 30 percent drop in gold prices in 2013. In Swiss franc terms, the central bank had a 15 billion franc valuation loss which wiped out a 3 billion franc profit in its FX currency positions and another 3 billion francs from the sale of it’s fund of UBS AG assets.

The central bank had a gold reserve of 1,040 ton as of November and a 446.4 billion francs in foreign currency. The SNB has an initiative that 20 percent of the bank’s assets must be in gold. The SNB President Thoams Jordan said “we’ve warned the budget chiefs over the past two years that we have a big balance sheet with lots of risk.” Jordan acknowledge that with the current balance sheet setup, there would be years with huge payments and equally-sized losses. The central bank was unable to make a payment to the government.

Like the Federal Reserve, the Swiss central bank’s balance sheet has greatly expanded. This was largely due to the 1.20 peg to the euro the SNB have been enforcing since 2011. Because of this, their FX reserves have reached about three-quarters of annual input, thus the bank would be forced to buy gold to meet the 20 percent mandate.