Swiss central bank suffers record loss

Switzerland’s central bank posted a first-half loss of 50.1 billion Swiss francs ($51.79 billion) on Friday, after the strength of the franc against the euro inflicted hefty losses on its holdings of the single currency.

The majority of the bank’s shareholders (pdf) are cantonal governments that rely on dividends from the Swiss National Bank to help support local spending.

The decline was nearly entirely caused by losses in foreign currency positions due to the appreciation of the Swiss Franc following the abandonment of the fixed exchange rate in January which led to a negative result of CHF 52.2bn (€49.45bn) in total. The bank’s foreign currency reserves suffered a huge devaluation when it abandoned a policy to cap the value of the franc against the euro earlier this year.

For last year’s second quarter, it reported a profit of 11.8 billion francs.

It pointed to strong fluctuations in its financial results depending largely on developments in the gold, foreign exchange and capital markets.

Peter Hegglin, the head of Switzerland’s 26 canton finance directors, said he was “not going to assume” that the first half loss would mean the SNB would not be paying a full year dividend, suggesting the bank could still reverse its fortunes.

The central bank said that 3.2 billion Swiss francs had also been lost on its holdings of gold.

The Swiss franc tumbled against the euro as a result, but recovered and was trading at CHF1.0593 to the euro at 1347 BST.

The SNB said euro-denominated assets made up 42% of its investment portfolio at the end of June, unchanged from the end of March, and 32% was held in US dollars, also unchanged.