The Swiss National Bank reported an annual loss of 3.2 billion Swiss francs ($3.62 billion) for 2023 due to the shift to positive interest rates, preventing it from issuing dividends for the second consecutive year. This loss mirrors a trend among central banks grappling with higher interest rates aimed at curbing inflation, resulting in substantial payouts to commercial lenders. The German central bank and its Dutch counterpart similarly reported significant losses last year.
Despite gains from gold holdings and interest on emergency loans provided during the Credit Suisse bailout, the SNB’s earnings were insufficient to offset the expenses incurred by its tighter monetary policy. Having transitioned away from negative interest rates in 2022, the SNB has been paying a 1.75% interest rate since June to commercial banks depositing funds overnight.
While Switzerland’s inflation remains modest compared to neighboring countries, the SNB’s tightened monetary stance has proven effective in curbing inflationary pressures. The latest data indicates a 1.2% rise in Swiss prices in February, marking the slowest increase in nearly two and a half years. Additionally, the appreciation of the Swiss franc last year, driven by higher interest rates and subdued Swiss inflation, further impacted the SNB’s profits.
The Swiss National Bank’s profit from its nearly 700 billion francs worth of foreign bonds and stocks reduced to 4 billion francs after accounting for dividends, interest, and valuation gains, which were offset by 58 billion francs in exchange-rate-related losses. While this 2023 result marks an improvement from the record loss of 132.5 billion francs in 2022, it still falls short of enabling dividend payouts to shareholders or the Swiss central or regional governments for the second consecutive year.
However, this loss is unlikely to impact monetary policy, with Chairman Thomas Jordan, who recently announced his departure, set to announce the latest interest rate decision on March 21. Economists like Karsten Junius from J.Safra Sarasin believe that the SNB’s effective monetary policy, evidenced by bringing Swiss inflation back into its target range faster than other major central banks, mitigates any potential political pressure resulting from the lack of dividend payments.
In 2023, the SNB recorded a profit of 4 billion francs from its foreign currency positions and a valuation gain of 1.7 billion francs on its 1,040 tonnes of gold holdings. Additionally, it profited 1.4 billion francs from emergency loans extended to facilitate the takeover of Credit Suisse.