Monetary policy: Economists criticize the SNB’s waiving of benefits for cantons

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The experts appearing under the name “SNB Observatory” wrote in a commentary published on Monday evening that the lack of payment was not the necessary consequence of the financial situation of the Swiss National Bank (SNB).

With a current provision for foreign exchange reserves of 113 billion francs, the country says it can easily pay the 6 billion francs it paid out in previous years. The SNB decides year after year to fill this basket at the expense of the distribution reserves.

The cantons and the federal government rightly complained about the arbitrary provision policy, whereby provisions were increased by 10 percent annually without any justification. According to criticism, this means that they are deprived of their share of the wealth that belongs to the people. “The Bank Council could change this practice as it is part of its mandate to approve the provisioning policy proposed by the Board of Directors,” it said.

According to the chairman of the Conference of Cantonal Financial Directors (FDK), it is painful for the cantons themselves that the SNB profit distribution is being canceled for the second time in a row. Because the announcement did not come as a complete surprise, the cantons were cautious when estimating any possible payouts from the SNB, Zurich’s financial director Ernst Stocker (SVP) told Keystone-SDA news agency last week at the request of the news agency.

The SNB’s interim results and the balance sheet loss at the end of 2022 already indicated “a threat”. The short-term impact on the cantons’ finances is therefore likely to be limited on average.

The SNB is waiving a payment to the cantons and a dividend because it suffered another loss in 2023. In concrete terms, last week the SNB reported, according to preliminary calculations, a loss of about 3 billion francs for the full year 2023 (previous year -132.5 billion).

The SNB’s revenues are highly dependent on the development of the gold, currency and capital markets, so strong fluctuations are the rule. As is known, the central bank is sitting on a huge mountain of foreign currency. These were bought to defend the minimum exchange rate for the euro, which was abolished in 2015, and then to weaken the franc.

Although the SNB has made large-scale foreign currency depreciations in recent quarters, shrinking its balance sheet somewhat, further foreign currency sales are unlikely in the coming months due to the recent strong appreciation of the Swiss franc. At the end of 2023, the SNB’s equity amounted to approximately 63 billion francs, with a balance sheet total of almost 800 billion francs. (SDA)

Source:Blick