Dollar and yen nibble away at SNB profits

The Swiss central bank’s accounts were boosted by profits made on bonds, equities and gold Keystone

Annual profits at the Swiss National Bank (SNB) halved last year to CHF6.9 billion ($7.3 billion), hit by adverse exchange rates against the weakening US dollar and Japanese yen.

Both the US Federal Reserve and the Japanese central bank pumped vast amounts of money into their economies in 2012, resulting in a combined CHF9.5 billion exchange rate loss for the SNB against these currencies.

The Swiss central bank has itself been intervening heavily in the foreign currency markets since capping the exchange rate between the franc and the euro two years ago, but eased up on its massive purchase of euros from the middle of last year.

The behaviour of several global central banks in recent times has raised concerns about a so-called currency war. The G20 group of powerful nations flagged the issue at its most recent summit, but central banks deny that their measures are designed to harm other currencies.

Despite losing a total CHF10.6 billion on foreign exchange positions, the Swiss central bank’s accounts were boosted by profits made on bonds, equities and gold. But results still fell way short of the CHF13.5 billion profit recorded in 2011.

The SNB said it would pay out a CHF1.5 million dividend to shareholders and give a further CHF1 billion to the government and cantons under the terms of an established profit distribution treaty.

The remainder of the profit will be allocated to the SNB’s reserves.