What to do with billions of foreign currency? This is the question the Swiss National Bank (SNB) has had to ask itself in recent years. SNB bought large amounts of dollars, euros, yen and the like because it wanted to keep the franc competitive.
The National Bank is known to invest in many US stocks, including star entrepreneur Elon Musk (51) electric car maker Tesla. As “Inside Paradeplatz” recently reported, SNB has lost nearly $1.5 billion on this investment in the last twelve weeks alone. At the end of September, $1.5 billion of the $3 billion remained with the National Bank as Tesla’s share price halved.
Expert: SNB is not market neutral
A scandal? Not at all. SNB has invested in numerous US stocks, mainly in the leading indices Dow Jones and the S&P 500, or the technology exchange Nasdaq. “The National Bank doesn’t have the human resources to closely examine and evaluate every company it invests in,” monetary policy expert Fabio Canetg (34) tells Blick. That’s okay too: “SNB’s portfolio includes overvalued companies and undervalued companies. It’s leveling.”
The SNB isn’t just market-independent, even if it likes to pretend it is. «The National Bank invests only in listed companies. In the mountains of Graubünden, a medium-sized SME flies under the SNB’s radar. “It’s not independent of the market,” says Canetg, who takes a critical look at the National Bank on the “Geldcast” podcast.
Deep Inflation: Job done
Despite a record loss – SNB lost CHF 142 billion in the first nine months – Fabio Canetg praises SNB. “He strengthened the Swiss franc to keep inflation low. He succeeded.” In fact, Switzerland is in an excellent position in international comparison, with an inflation rate of 2.9 percent. Only China has an even lower inflation rate.
“The central bank’s ability to put inflation above losses should be owed to it,” Canetg says. In 2023, the Central Bank should prioritize monetary policy targets. “The SNB should and can afford to raise interest rates further and take a loss.”
SNB is not sustainable enough
But not everyone is as happy with the Swiss National Bank as Fabio Canetg. At the end of December came a reprimand from WWF Switzerland. In a report, the country’s largest environmental organization evaluated the sustainability factors of financial market regulation and central bank operations in 44 countries. The result: Switzerland falls further behind in an international comparison.
Background: The Federal Council stated in December that Switzerland should play a leading role as a sustainable financial centre. But the WWF report complains that unlike other central banks, the SNB does little. Although the National Bank has announced that it will withdraw from coal investments at the end of 2020, large sums are still invested in environmentally harmful activities such as deforestation, fossil fuel exploration and extraction, and destructive mining.
“Swiss financial players need clear framework conditions that create incentives for sustainability and make unsustainable investments less attractive,” says WWF Switzerland. Fabio Canetg thinks: “The SNB Board should deal with monetary policy issues on its own. But Parliament can certainly have a say on political issues like sustainability.”
Until now, such approaches have always been rejected in parliament, with reference to the independence of the Central Bank.