SNB suffers record 23b-franc loss amid stronger currency

[ZURICH] The Swiss National Bank incurred a record loss of 23 billion francs (S$33 billion) last year after it abandoned its currency cap.

The appreciation of the franc that followed the Jan 15 decision resulted in a loss of 20 billion francs on its foreign- currency positions, the central bank said in a statement on Friday based on preliminary calculations. The 2015 result exceeds the 20.8 billion-franc loss caused by a strengthening currency in 2010, when Greece asked for its first bailout.

While the SNB doesn't need to generate a profit for monetary-policy purposes, municipalities have come to rely on an annual handout from the central bank to fund local spending. Their circumstances are already straitened by slower economic growth brought on by the currency's ascent from the cap of 1.20 per euro to about 1.09 now.

The SNB said it would pay a dividend of 15 francs per share as well as 1 billion francs to the federal government and cantons.

"This would contribute to easing the strain on cantonal finances," UBS Group AG economist Dominik Studer said in a note published earlier in the week.

The Swiss currency finished 2015 more than 10 per cent stronger against the euro, which constitutes more than 40 per cent of the SNB's foreign-exchange holdings. It depreciated nearly 1 per cent against the dollar, reflecting the recovery of the US economy and the prospect of the Federal Reserve's first interest-rate increase in nearly a decade.

The SNB is a joint-stock company, with the majority of shares held by cantons and cantonal banks. In 2013, the cantons had to forgo their payout after the price of gold slumped. The SNB earnings are calculated by comparing asset prices at the start and end of each period. The SNB will published the definitive figures for 2015 on March 4.

BLOOMBERG