SNB hard hit by gold price fall

January 07, 2014 - 8:41:57 am

ZURICH: Switzerland’s central bank said yesterday that it lost billions in 2013 as gold prices plunged and therefore could not pay dividends to the Swiss cantons for the first time in more than a century.

The Swiss National Bank (SNB) has been dishing out dividends to the Swiss cantons ever since its creation in 1907, and to the Swiss Confederation since 1991.  But yesterday, the bank said neither would receive handouts this year, after provisional figures showed it would be reporting a loss of 9bn Swiss francs ($9.9bn) for 2013.

It had lost far more on the value of its gold holdings, which shed 15bn francs during a year when the price for the precious metal dropped by 28 percent. That deep loss was offset though by gains of 3bn Swiss francs on the bank’s foreign currency positions, and another increase of 3bn on a stabilisation fund it put in place in 2008 to save Switzerland’s largest bank, UBS, from collapse.

But since SNB needed to put aside 3bn Swiss francs as a provision for its currency reserves, it said it expected to end up about 12bn francs in the red.

“As this loss will be substantially larger than the 5.3bn Swiss francs in the distribution reserve, the SNB cannot make a profit distribution,” the bank explained.

The loss does not come as much of a surprise since SNB already said in October that the value of its gold holdings had shrunk by 10.7bn francs during the first nine months of the year.

But the news that the bank would not be padding state and cantonal coffers this year did come as a blow and sparked worries of looming budget deficits.

Last year, SNB reported a 6.9bn franc profit and redistributed one billion francs of its profit to the Swiss Confederation and cantons. This year, the country’s 26 cantons, which resemble US states, stand to lose out on 667 million Swiss francs, according to Peter Hegglin, who heads an organisation of all the Swiss cantonal financial chiefs.

“This is a shame, because many of the cantons are already suffering from financial difficulties,” he said and added that SNB’s contributions usually represent between 0.4 and 1.2 percent of cantonal budgets.  Bern had hoped to post a 121m franc surplus, but now that it will lose out on 333m francs from the central bank, it could post a deficit of some 212 million francs, a finance ministry spokesman said. AFP

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