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The increasing volatility of SNB Earnings Annual results are not really definite. Given that the SNB accumulates foreign currencies with interventions, they have huge swings. But the SNB may lose 50 billion in one year and win 60 billion in the next year or vice verse. Low Inflation, Crashes and Central Bank Money Printing The crisis caused by the Covid19 virus,is a typical crisis with low inflation (at least for now). During such a crisis, central bank money printing helps asset price to rise again. This applies to all assets on the SNB balance sheet: Government and corporate bonds Stocks Gold The Corona crisis is just one of these low inflation crisis. Therefore SNB profits have recovered; this time far more quickly than during the Financial Crisis. As
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George Dorgan considers the following as important: 1) SNB and CHF, 1.) SNB Press Releases, Featured, newsletter, SNB balance sheet, SNB equity holdings, SNB Gold Holdings, SNB profit, SNB results, SNB sight deposits, Swiss National Bank
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The increasing volatility of SNB EarningsAnnual results are not really definite. Given that the SNB accumulates foreign currencies with interventions, they have huge swings. But the SNB may lose 50 billion in one year and win 60 billion in the next year or vice verse. Low Inflation, Crashes and Central Bank Money PrintingThe crisis caused by the Covid19 virus,is a typical crisis with low inflation (at least for now). During such a crisis, central bank money printing helps asset price to rise again. This applies to all assets on the SNB balance sheet:
The Corona crisis is just one of these low inflation crisis. Therefore SNB profits have recovered; this time far more quickly than during the Financial Crisis. As opposed to 2009 until early 2011, the Swiss Franc is currently not overvalued. Therefore the SNB did not let the Swiss franc appreciate. Without an a franc appreciation, however, the SNB must make profits during a period of central bank money printing. But a prolonged crisis, will again put pressure on SNB to let the franc appreciate. Franc will rise again with inflationWith a big rise of inflation, the run into the Swiss franc will start again. And this at an exchange rate that is not digestible for the SNB.
And this will lead to a massive SNB loss around 150 billion CHF. However, we are not there yet: Inflation is low and interest rates even lower. |
Some extracts from the official statement.
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Income statement, 1 January–30 September 2020 Source: snb.ch - Click to enlarge |
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Profit on foreign currency positionThe profit on foreign currency positions totalled CHF 5.3 billion. Interest and dividend income amounted to CHF 6.1 billion and CHF 2.6 billion respectively. A price gain of CHF 11.7 billion was recorded on interest-bearing paper and instruments, while equity securities and instruments registered a gain of CHF 7.1 billion. Exchange rate- related losses totalled CHF 22.3 billion. The following numbers are in billion Swiss Francs.
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SNB Profit on Foreign Currencies Source: snb.ch - Click to enlarge |
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Valuation gain on gold holdings
Percentage of gold to balance sheetThe percentage of gold has risen to 5.97% thanks to higher prices.
Balance Sheet The balance sheet has expanded by 114.1 bn. francs, this is 13.2%.
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SNB Balance Sheet for Gold Holdings for Q3 2020 Source: snb.ch - Click to enlarge |
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Profit on Swiss franc positionsThe SNB maintains its profitability, last but not least, thanks to the reduction of the profitability of banks. When too many funds arrive on their accounts, they must deposit them on their sight deposit account at the SNB.
Profit on Negative Interest ratesFurthermore, the SNB harms the Swiss economy, when it reduces the profits of Swiss banks by negative interest rates, currently -0.75%. But with this measure she maintains her own profitability. The SNB obtained far less money for negative rates, while sight deposits were slightly up (see below). The reason is this time the Corona crisis and that banks lend more money and did not put on the accounts of the central bank. Still, as compared to the FX profits or gains on equities and bonds above, this number is relatively low.
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SNB Result for Swiss Franc Positions for Q3 2020 Source: snb.ch - Click to enlarge |
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SNB LiabilitiesElectronic Money Printing: Sight Deposits Sight deposits is the biggest part of SNB interventions. Sight deposits increased more strongly (19%) than the total balance sheet. The increase was on domestic banks.
Paper PrintingBanknotes in circulation: +0.81 bn francs to 85.7 bn. CHF (less than 1%). This old form of a printing press, today a less important form of central bank interventions. It showed that safe-haven Swiss francs, e.g. 1000 franc bank notes are currently less in demand than previously. Provisions for currency reservesAs at end-September 2020, the SNB recorded a profit of CHF 15.1 billion before the allocation to the provisions for currency reserves. In accordance with art. 30 para. 1 of the National Bank Act (NBA), the SNB is required to set aside provisions permitting it to maintain the currency reserves at the level necessary for monetary policy. The allocation for the current financial year is determined at the end of the year. |
SNB Liabilities and Sight Deposits for Q3 2020 - Click to enlarge |
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Willkommen in einer Zukunft ohne Zins
Die SNB, die EZB und andere Zentralbanken erwarten auch langfristig keine Zinswende – und machen Nullzinsen zur Regel. Eine Übersicht der Prognosen. Diese Woche ist die Welt einer Zukunft ohne positive Zinssätze ein Stückchen näher gerückt. Schwedens Notenbank erneuerte ihren Zinspfad.
“Monetäre Staatsfinanzierung mit Folgen (Monetary Financing of Government),” Die Volkswirtschaft, 2020
Die Volkswirtschaft, 24 July 2020. PDF. Clarifying the connections between outright monetary financing, QE, the distribution of seignorage profits, the relationship between fiscal and monetary policy, and central bank independence.
“Unabhängigkeit der Nationalbank (Independence of the SNB),” FuW, 2020
Von verschiedenen Seiten werden Ansprüche an den Gewinn der Nationalbank gestellt. Es sollte in der Kompetenz der SNB liegen, zu entscheiden, welchen Teil ihrer Bilanz sie nicht zur Erfüllung ihrer Aufgaben benötigt.
Weekly SNB Sight Deposits and Speculative Positions: SNB buying euros at high prices
Update November 02, 2020: SNB buying euros at high prices. Sight Deposits have risen by +0.7 bn CHF, this means that the SNB is intervening and buying Euros and Dollars: The change is +0.7 bn. compared to last week.
U.S. dollar liquidity-providing operations from 1 September 2020
In view of continuing improvements in U.S. dollar funding conditions and the low demand at recent 7-day maturity U.S. dollar liquidity-providing operations, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank, in consultation with the Federal Reserve, have jointly decided to further reduce the frequency of their 7-day operations from three times per week to once per week.
Swiss balance of payments and international investment position: Q2 2020
In the second quarter of 2020, the current account surplus amounted to CHF 10 billion; in the same quarter of 2019 it was CHF 21 billion. This decline was principally due to lower receipts from direct investment abroad. While the goods trade balance and the services trade balance changed only marginally, there was a significant decrease in receipts and expenses.
Monetary policy assessment of 24 September 2020
The coronavirus pandemic continues to exert a strong influence on economic developments. The SNB is therefore maintaining its expansionary monetary policy. In so doing, it aims to cushion the negative impact of the pandemic on economic activity and inflation.
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