The Swiss National Bank (SNB) has an important job. Its failure to control inflation could erode the real value of our savings – 7% inflation over 10 years would halve the real value of a bank deposit. Likewise high inflation would most likely come with high mortgage interest rates – an 8% mortgage rate would cause many homeowners to go bust. While the SNB manages these important things few know much about it. Here are 5 surprising facts.
1. It’s not owned by the Swiss Government
Governments normally own their central banks. For example the UK Government owns the Bank of England (all of its shares are held by the Treasury solicitor on behalf of HM Treasury). The Swiss National Bank (SNB) is unusual. It is owned by Swiss cantons (States), cantonal banks, private individuals and companies. The Swiss cantons together own 45%, 15% is owned by cantonal banks and the remaining 40% by private individuals or companies. The Swiss Federal Government owns no shares. The Bank is however controlled by special laws in the Federal Constitution.
2. It’s shares are listed on the stock exchange and pay dividends
Its shares are listed on the Swiss stock exchange (Ticker: SNBN:SW) and their price moves up and down like every other share traded in the market. Every year, with rare exceptions like last year, shareholders receive a dividend. On 28 October 2015 shares were trading at CHF 1,110 per share.
3. It’s owned by foreigners
Foreign companies and individuals own 15% of the total issued registered shares. The single largest private shareholder is a German national called Theo Siegert. a German business leader and professor at Munich University. He owns around 7% of the Bank, more than any Swiss canton except Bern.
4. Its assets are greater than the GDP of Sweden
The gross assets of the SNB at the end of 2014 amounted to over CHF 560 billion. That is more than the annual Gross Domestic Product (GDP) of Sweden and over 80% of Switzerland’s own GDP. Around 90% of these assets are foreign currency holdings resulting largely from currency purchases aimed at maintaining the exchange rate cap – Euros accounted for 46% of total currency holdings.
5. All of its gold would fit into a single shipping container
At the end of 2014 the SNB owned just over 1,000 tonnes of gold valued at close to CHF 40 billion. This is about 52 cubic metres and it would fit inside a single long shipping container – a 40-foot container has an internal volume of 67.5 m3.
One unsurprising fact
In 2011 the SNB decided to stop the Swiss franc going above 0.83 Euros per franc (a cap set at 1.20 francs to one Euro). To do this it created new francs and spent them on Euros and other assets, increasing the supply of francs in circulation, driving down their price. The SNB however ended up running just to stand still as the Euro continued weakening and demand for Swiss francs increased – it had not expected the Euro to weaken so much.
By January 2015 they could see that continuing would have led to a ballooning balance sheet as they bought more and more assets with newly minted francs. This could have led to instability and future losses on the assets, foreign currency in particular, that it was adding to its balance sheet. Those who thought the cap was folly were proved right. On 15 January 2015 the SNB stopped managing the exchange rate. And this is the unsurprising fact: the SNB cannot predict the future direction of currency prices.
Important note: information provided in this article does not constitute financial advice and should not be taken as financial advice.