The Swiss National Bank projects losses on foreign currency transactions of CHF131 billion, with another CHF1 billion in losses on positions held in Swiss francs.
Switzerland’s central bank racked up estimated losses of 132 billion Swiss francs ($143 billion) for 2022—its biggest loss since 1907, and equal to around 18% of GDP.
The Swiss National Bank (SNB) projects losses on foreign currency transactions of CHF131 billion, with another CHF1 billion in losses on positions held in Swiss francs. SNB made a small valuation gain of CHF400 million on its gold holdings.
The SNB, an august institution, has been accused of keeping a lid on the strength of the franc to support Switzerland’s export-centric economy. However, Switzerland saw gains in the value of the franc last year, due in part to a series of interest rate hikes designed to control imported inflation.
SNB’s record losses are not an isolated occurrence. Other central banks are under a cloud too. In the first quarter of 2022, the US Federal Reserve Bank showed $330 billion in unrealized losses. “The Fed followed that up with a [summer] statement saying that it expected to run at a loss for several years, booking between $60 billion to 180 billion in deferred assets, which is essentially an IOU to the government,” says Modulus CEO Richard Gardner. “In other words, a loss.”
However, it is difficult to normalize SNB’s losses, given fundamental differences in both policy and position between it and the US Fed. “In the US, the issue is that it paid more interest than it received in income,” Gardner explains. “With the Swiss, the majority of the losses were due to forex positions.”
The Swiss loss also represents a much greater portion of the country’s GDP than the Fed’s loss relative to US GDP. Definitive figures will be released on March 6. The annual report will be published on March 22.
Are SNB’s losses a harbinger of things to come? Several other national banks are sitting on losses, including the central banks of Australia, Belgium, Canada, England and Japan. The European Central Bank is also warning of losses.