Swiss National Bank Posts Largest Loss In Its History

Key Takeaways:

  • The SNB reported the biggest financial loss in its history for the first nine months of 2022.
  • If losses continue to climb, the central bank will be unable to pay the Swiss Federal and Cantonal governments.
  • A US Federal Reserve cut-back on sizable interest rate hikes may negatively increase the strength of the Swiss Franc.
Swiss National Bank is facing worst losses in history
Economic crisis with Covid-19 crisis concept with Switzerland map, 3d rendering

WISCONSIN (CoinChapter.com) — The Swiss National Bank (SNB) lost 142.2 billion Swiss Francs during the first nine months of 2022; that sum equals $142.9 billion. First, SNB officials said rising interest rates are the main reason, and secondly, a stronger Franc weighed on the value of foreign investments.

In its 116-year history, there have never been heavier SNB losses in this short period. Though 142.2 billion Francs is an enormous amount of money, there is little chance the bank will face bankruptcy because of its ability to print money. As a result, the bank can operate with negative equity, according to the SNB.

The SNB said within the multi-billion negative figure, exchange rate losses totaling 24.4 billion Francs were another reason for a record amount.

SNB top investment holdings.
SNB top investment holdings. Credit: Reuters

The bank has its most significant investment holdings in Apple (6.55%), Microsoft (5.37%), Amazon (2.86%), and Alphabet, Inc. (1.92%). As a result, gold holdings lost an additional 1.1 billion Francs.

Losses May Strain Swiss National Bank Payouts

SNB losses may mean the central bank cannot pay the Swiss Federal and Cantonal (26 member states of the Swiss Federation) governments. If enough losses mounted, it would completely erase the SNB’s equity. The bank raised interest rates to combat inflation and will not comment on what would happen if equity were to be wiped out.

Swiss National Bank government payouts are under severe strain for the first time in recent memory.
Swiss National Bank government payouts are under severe strain for the first time in recent memory. Credit: Bloomberg

Due to the war in Ukraine, the Eurozone crisis prompted heavy investment in the Franc because of its safe-haven status. Therefore, the SNB tried to balance the pressure on the Franc by creating more currency; in turn, large bonds were bought.

Future US Rate Hikes May Affect Swiss Franc

Over the past few weeks, currency trading in the USD/CHF has been just below parity (1.00).

However, buyers have yet to be able to push hard above 1.00 and hold due to a possible US Federal Reserve move to put the brakes on massive interest rate hikes. Investors will learn next month if the Fed will begin dialing back on a flurry of 75 bps rate hikes.

If the US Central Bank decides to slow down and watch how things develop, this could keep pressure on the SNB as investors will pour money into a strengthening Franc.

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Swiss National Bank, Swiss National Bank Posts Largest Loss In Its History

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