Swiss National Bank sees loss of $23 billion for 2015

GENEVA -- The Swiss National Bank says it expects to post a massive loss of 23 billion Swiss francs ($23 billion) for 2015, largely because of its decision a year ago to ditch a policy that limited the export-sapping rise of the national currency.

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In a statement Friday, it said 20 billion francs of the loss was due to declines in the value of the bank's foreign currency holdings. A further 4 billion loss came from declining gold prices while a 1 billion gain emerged from holdings of Swiss currency holdings. Fuller details will be published on March in the central bank's annual report.

The disclosure reveals the cost of the SNB's decision on Jan. 15, 2015 to abandon the centerpiece of its monetary policy: pegging the franc to the euro to make sure it didn't rise too much.

The peg, which was introduced in Sept. 2011, was an attempt to halt the rise of the franc -- a traditional safe haven currency for investors -- against the euro at a time when the eurozone debt crisis was at its height. The strong franc was then particularly problematic for Swiss exporters, who were forced to drastically cut prices to remain competitive.

That policy was getting increasingly expensive to defend as the euro weakened in global markets amid growing expectations that the European Central Bank was preparing a massive stimulus program for the ailing 19-country eurozone economy. Such stimulus tends to weigh on a currency's value.

To defend the peg against a weakening euro, the SNB had to increasingly buy euros and sell the franc. But the cost of doing so became prohibitive. It finally ditched the peg in January, a week before the ECB announced its new stimulus.

The SNB's decision to call time on the policy saw the Swiss franc surge immediately on foreign exchange markets. Within minutes of the announcement, the franc spiked around a third against the euro and the dollar.

Though the franc drifted down from those heights over the course of 2015, it still ended the year around 10 per cent higher against the euro. That constituted the bulk of the SNB's loss. Against the dollar, it ended the year broadly flat as the U.S. currency appreciated strongly ahead of the Federal Reserve's widely expected decision in December to raise interest rates for the first time in nearly a decade.



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