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Swiss central bank's only overseas branch office is in Singapore
SINGAPORE is so important as a leading financial centre in Asia that the Swiss National Bank's first and only overseas branch office is located in the Republic. Swiss National Bank (SNB) is the equivalent of the Monetary Authority of Singapore (MAS), Singapore's central bank.
After evaluating a number of locations in the Asia-Pacific region, SNB opened its Singapore branch in 2013. The move was made to ensure a more efficient management of its assets in the region, against the background of a sharp increase in its foreign exchange reserves and the growing importance of Asian financial markets. The Singapore branch office with operational functions is fully integrated into SNB's oversight and control processes.
The task of SNB's Singapore branch, which has nine staff, is to manage the Asia-Pacific part of its foreign currency reserves. At the end of 2019, its overall currency reserves amounted to 794 billion Swiss francs (S$1.2 trillion), of which some 110 billion Swiss francs, or about 14 per cent, were held in Asia-Pacific bonds and stocks, mainly denominated in Japanese yen, South Korean won, Australian dollars, Chinese renminbi and Singapore dollars. SNB also holds 1,040 tonnes of gold.
The Swiss franc as a safe-haven currency has been under appreciation pressure, forcing the SNB to remain willing to intervene more strongly in the foreign exchange market and to charge a negative interest rate of minus 0.75 per cent - the lowest in the world - to banks which deposit money with it.
The SNB says that in addition to managing the Asia-Pacific portfolio, its Singapore branch is responsible for implementing monetary policy in the foreign exchange market during Asian trading hours. The Singapore branch facilitates the maintenance of a network of relationships with other institutional investors in the Asia-Pacific region, including Asian central banks and sovereign wealth funds.
Marco Huwiler, head of SNB's Singapore branch, says that investing in markets such as Japan, China, South Korea, Australia and Singapore is an important part of its efforts to diversify the country's foreign currency investments on a global scale. For instance, operating during Asian trading hours comes with some great benefits: when important economic data is published or Asian central banks make their policy announcements, SNB's portfolio managers and foreign exchange traders based here are at work. Hence, they are able to immediately analyse these events and react if required.
"During Asian trading hours, we benefit from better market liquidity, lower transaction costs and smoother trading and settlement processes," Dr Huwiler tells The Business Times in an interview.
"Having a presence in Singapore has also proved highly beneficial when it comes to implementing monetary policy in the foreign exchange market and thereby ensuring appropriate monetary conditions for Switzerland's economy," he adds. As currency trading is a round-the-clock business with no such thing as opening hours, SNB's Singapore branch is able to guarantee the seamless continuation of foreign exchange market coverage during night hours in Switzerland.
Further, having a presence in Singapore has also proved to be very advantageous with regard to monitoring and analysing developments in the financial markets. The proximity to financial market participants, peers such as sovereign wealth funds and other large investors as well as the official sector, facilitates the gathering of market intelligence.
"This provides us with a deep understanding of the market and economic environment in the Asia-Pacific region, which is becoming even more significant for the global economy. Our experience so far has been very positive. As a representative of our branch, I can establish and maintain contacts with our peers, who are always prepared to exchange experiences. This is very valuable to us," says Dr Huwiler."
"Currently, there is great interest in digital transformation and also in digital currencies. This is why we are following developments in these areas, for which Singapore has become a regional hub and also acts as a link between Southeast Asia and Europe."
Adds Dr Huwiler: "It is also a great opportunity and experience for each of us to immerse into a different culture without having to change our employer, and to appreciate Singapore's unique quality of life as a melting pot of different nationalities and cultures. If there is anything I miss, it is the Swiss mountains with their skiing slopes and hiking trails."
Singapore has proved to be an excellent location for SNB's first overseas branch office as being an important financial centre in Asia, it offers a convenient platform for exchanges with market participants. In addition, the number of other institutional investors, such as sovereign wealth funds, pension funds and international forums with a presence in Singapore, is steadily increasing.
Until the outbreak of the Covid-19 pandemic, numerous conferences and events in the field were held in Singapore, which meant that participation was possible with little effort. Transport connections are also excellent. Singapore's Changi airport, for instance, serves as an important hub in Asia and has many direct connections.
At the same time, Singapore excels in terms of quality of life. Public services and infrastructure are of high quality. In addition, public security is impeccable and the health and education systems are of a high level, which also makes Singapore an attractive place for employees with families. Thanks to Singapore's cosmopolitan nature, it is easy for them to build up a social network in their private lives.