SNB Should Distribute Profits Directly to Citizens, Study Says

(Bloomberg) — The Swiss National Bank should distribute its profits directly among citizens in order to take politics out of the decision of how much it hands out, a Swiss pro-market think tank said.

This would be the most efficient way to isolate from special interest the question on how much cash should be retained to bolster equity, researchers Stefan Legge, Fabian Schnell and Jürg Müller of Zurich-based Avenir Suisse argued in a paper published on Tuesday.

The SNB currently transfers its profits to the state — based on a periodically renewed agreement with the finance ministry. If certain earnings targets are met, two thirds of the payout go to Switzerland’s 26 cantons, while one third goes to the federal government. 

The maximum annual distribution is 6 billion francs ($7 billion), but a record loss in 2022 means that no profit was transferred for the last two years. This has made the issue contentious in Switzerland. While a number of politicians protested — partly because they had planned for the money in their budgets — the SNB also drew criticism from some economists who deemed the portion of earnings the central bank retained too large.

If Swiss lawmakers were to opt for changing the payout regime — which looks unlikely for now — this would be a novelty internationally. According to a European Central Bank study from 2016, none of the 57 monetary institutions surveyed distributed profits among the people of their countries. 

In the paper, Avenir Suisse — a foundation sponsored by companies including Nestle SA, Glencore Plc and UBS Group AG — also proposed to enshrine the SNB’s mandate of maintaining price stability in the constitution and to make it legally binding that it can’t exclude certain companies from its investments.

The timing of the think tank’s publication coincides with the imminent departure of the central bank’s long-time President Thomas Jordan and a resulting leadership reshuffle.

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