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To be clear, the SNB is not "spending" money. They were intervening to prevent the CHF from appreciating, not the reverse. In this situation, they (as the centr
by ddeck 12y ago
To be clear, the SNB is not "spending" money. They were intervening to prevent the CHF from appreciating, not the reverse. In this situation, they (as the central bank) are creating new money (CHF), which they sell to anyone who wants to purchase them for EUR1.20 each.
The result of this is to accumulate enormous amounts of EUR, which is typically used to purchase EUR area government securities.
The SNB actually made a profit of CHF 38 billion in 2014 from price changes/interest on the securities they hold as well as FX gains. [1]
They of course will now be taking significant losses on those foreign currency assets as the CHF appreciates.
[1] http://bigstory.ap.org/article/eaafe09a860f4b09abc789fe6f5d26f5/swiss-central-bank-reports-profit-38-billion-swiss-francs http://bigstory.ap.org/article/eaafe09a860f4b09abc789fe6f5d2...
- branchless 12y agoyou de man
- Keyframe 12y agoOn the other hand, SNB now has a decent-sized mountain of Euros to sell.
- ddeck 12y agoThe actual size of the SNBs EUR holdings hasn't grown that much (EUR174 bn in Q3 2014 from EUR90 bn in 2010) and EUR allocation has actually reduced (to 45% from 55% over the same period) [1]. I believe the most recent comments by the ECB also indicate that they have no immediate plans to reduce reserves. With a JPMorgan analyst suggesting a few days ago that a size for the expected ECB QE program of EUR500 million is missing a zero, it's likely not going to be too difficult to find a buyer if they did decide to do so. [1] http://www.snb.ch/ext/stats/balsnb/pdf/deen/A3_2_Devisenanlagen_der_SNB.pdf http://www.snb.ch/ext/stats/balsnb/pdf/deen/A3_2_Devisenanla...