On 31 July 2023, the Swiss National Bank (SNB) announced it had made a loss of CHF 13.2 billion during the second quarter of 2023. This takes the bank’s net equity down to CHF 79 billion and pushes the reserves used to make distributions to the cantons deeper into negative territory – at 30 June 2023 reserves for future distribution stood at almost CHF – 40 billion.
Over recent years the SNB has taken a financial beating. In 2022, the bank lost CHF 132 billion. In the first quarter of 2023, it bounced back into the black, making a CHF 27 billion profit, only to return to further losses in the second quarter.
The recent losses are mainly due to exchange rate movements (-8.1 billion), a loss on gold (-3.1 billion) and a loss on Swiss franc assets of -1.9 billion.
With a focus on price stability, central bank balance sheets are supposed to reflect the results of this focus and be of secondary importance. But such an outcome requires central banks remain apart from politics. In Switzerland, the SNB is somewhat of a political piggy bank, required to distribute profits to the government, albeit under strict rules and limits. While this may feel sensible when the bank is making large gains, it looks less sensible in retrospect when reserve profits are required to cover losses. If cumulative losses eventually leave the bank short of equity some past profit distributions may need to be returned, turning a former bounty into a financial cost. With net equity of nearly CHF 80 billion the bank is not at that point and may not end up there. But it is much closer than it was a few years ago.