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Fed and ECB Money Printing Helps SNB Back into Positive Territory

The increasing volatility of SNB Earnings

Annual results are not really definite. Given that the SNB accumulates foreign currencies with interventions, they have huge swings.

But the SNB may lose 50 billion in one year and win 60 billion in the next year or vice verse.


Franc will rise again with crisis or inflation

With a new crisis or a with a big rise of inflation, the run into the Swiss franc will start again.

Deflationary period (e.g. Corona Crisis)

During deflationary periods and recessions, the SNB will strongly intervene, similarly as she did in 2008/2009.

During the Corona Crisis, the SNB intervened at 1.05 – 1.06 for a euro, in 2009 even for 1.50 These high intervention levels pave the way for losses in later periods, which are the inflationary periods.

First inflationary period in 2018

There has been a very small first inflationary period. This was the year 2018, when the Fed hiked rates. As result asset prices fell and the SNB had a loss.

However this period was very short, the Fed already reversed course in 2019.

Inflationary periods

During a real inflationary period (like the one during the 1970s) the

  • EUR/CHF will fall by 20% (currently this would imply 0.90).
  • and USD/CHF by 15% (currently this would mean 0.75).
  • Stocks will lose up to 70% in the following crash.
  • Due to inflation the government bonds on the SNB balance sheet will also lose value, this might be 30%.

And this will lead to a massive SNB of at least 150 billion CHF.

This is not a black swan, but a normal inflation scenario. We have seen a 60% rise of CHF in the 1970s; this was a black swan.

In this case all assets except gold will fall. However, SNB’s gold share of 6% is too small to cushion this scenario.

Some additional technical details:
The SNB will earn some money on interest payments when she is rolling into new government bond issuances, similarly as she did in the 1970s.
This will reduce the losses to 150 bn again.

The crux, however, is

  1. that she bought the biggest part of government bonds at elevated prices.
  2. In the 1970s there were positive real interest rates. This will not be the case in the future inflation periods, quite the opposite.

Comparative Daily Exchange Rates: Relative to US Dollar

(see more posts on US dollar, )
USD-DEM-CHF 1977-1979

USD-DEM-CHF 1977-1979, © 2012 by Prof. Werner Antweiler, University of British Columbia - Click to enlarge

Some extracts from the official statement with annotations.

Interim results of the Swiss National Bank as at 30 June 2020

The Swiss National Bank reports a profit of CHF 0.8 billion for the first half of 2020.

The first half of 2020 was dominated by the effects of the coronavirus pandemic, which led to high volatility on the financial markets. The loss on foreign currency positions amounted to CHF 6.8 billion. A valuation gain of CHF 7.1 billion was recorded on gold holdings. The profit on Swiss franc positions was CHF 0.6 billion.

The SNB’s financial result depends largely on developments in the gold, foreign exchange and capital markets. Strong fluctuations are therefore to be expected, and only provisional conclusions are possible as regards the annual result.

Income Statement for Q2 2020

Income Statement for Q2 2020

Source: - Click to enlarge

Profit on foreign currency position

In a period of low interest rates asset prices rise; last but not least because of margin debt. When the Fed raised rates in 2018, the SNB had a loss of 15 billion francs. Fortunately for the SNB, the Fed stopped raising rates in 2019, on the contrary U.S. rates went down.

Rising asset prices implies that the SNB obtains a profit.


The following numbers are in billion Swiss Francs.

SNB results Q2 2020
(in bn CHF)
Profit BalanceSheet Profit in %
Total Profit on foreign currencies -6.7 956.3 0.70%
Interest income (coupons) 4.1 956.3 0.43%
Dividend income 1.8 956.3 0.19%
Price changes in bonds 10.8 956.3 1.13%
Price changes in equities -4.4 956.3 -0.46%
Exchange Rate Gains -19.1 956.3 -2.00%

SNB Loss on Foreign Currencies

SNB Loss on Foreign Currencies

Source: - Click to enlarge

Valuation gain on gold holdings

A valuation gain of CHF 7.1 billion was recorded on gold holdings, which remained unchanged in volume terms. Gold was trading at CHF 54,069 per kilogram at the end of June 2020 (end-2019: CHF 47,222).

SNB Results Q2 2020
(in bn CHF)
Profit Balance Sheet Holdings in %
Balance Sheet

Profit in % on balance sheet
Total Profit on Gold………………………….. 7.1 956.3 5.88% 0.74%

Percentage of gold to balance sheet

The percentage of gold has risen to 5.88% thanks to these rising prices.

The SNB has maintained the same quantity of gold.


SNB Balance Sheet items
(in bn CHF)
2020/Q2 2019
2018 2017 2016 2015
Gold………………….. 56.2 49.1 42.2 42.5 39.4 35.5
Total Balance Sheet 956.3 860.9 812.8 843.3 746 640
Gold in % of Balance Sheet 5.88% 5.71% 5.20% 5.04% 5.28% 5.55%

Balance Sheet compared to GDP


(in bn CHF) 2020/Q2 2019 Increase in %
SNB balance sheet in CHF………………. 956.3 860.9 +11.1%
Swiss nominal GDP in CHF 680(est.) 700 (est.)
% of GDP 136.6% 122.9%

SNB Balance Sheet for Gold Holdings for Q2 2020

SNB Balance Sheet for Gold Holdings for Q2 2020

Source: - Click to enlarge

Profit on Swiss franc positions

The SNB maintains its profitability, last but not least, thanks to the reduction of the profitability of banks. When too many funds arrive on their accounts, they must deposit them on their sight deposit account at the SNB.

The profit on Swiss franc positions totalled CHF 0.6 billion. It largely resulted from negative interest charged on sight deposit account balances.

Negative Interest rates

Furthermore, the SNB harms the Swiss economy, when it reduces the profits of Swiss banks by negative interest rates. But with this measure she maintains her own profitability.

Still, as compared to the FX profits or gains on equities, this number is relatively low.


(in million CHF) 2020
Change in %
Income through negative interest rates 0.664 1.008 -34.13%
SNB balance sheet 956.3 860.9 +11.1%
in % of balance sheet 0.07% 0.12%

SNB Result for Swiss Franc Positions for Q2 2020

SNB Result for Swiss Franc Positions for Q2 2020

Source: - Click to enlarge

SNB Liabilities

Electronic Money Printing: Sight Deposits

Sight deposits is the biggest part of SNB interventions.

In Q2 2020 the SNB intervened again, increasing sight deposits and its debt towards the Swiss state.


(in bn CHF) Q2/2020 2019
Change in%
Total Sight Deposits 691.3 591.4 +16.89%
Balance Sheet 956.3 860.9 +11.08%
Sight Deposits % of balance sheet 72.29% 68.70%
Paper Printing

Banknotes in circulation: +0.45 bn francs to 84.9 bn. CHF

This old form of a printing press, today a less important form of central bank interventions. It showed that safe-haven Swiss francs, e.g. 1000 franc bank notes are currently less in demand than previously.

Provisions for currency reserves

As at end-June 2020, the SNB recorded a profit of CHF 0.8 billion before the allocation to the provisions for currency reserves.

In accordance with art. 30 para. 1 of the National Bank Act (NBA), the SNB is required to set aside provisions permitting it to maintain the currency reserves at the level necessary for monetary policy. The allocation for the current financial year is determined at the end of the year.

SNB Liabilities and Sight Deposits for Q2 2020

SNB Liabilities and Sight Deposits for Q2 2020

Source: - Click to enlarge

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George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.
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