JULY 29, 2011, 4:15 A.M. ET
SNB Posts Loss of $10.8 Billion
ZURICH—The Swiss National Bank is likely to come under renewed public criticism after reporting on Friday another hefty book loss owing to the Swiss franc's sharp appreciation against all major currencies.
Switzerland's central bank said it posted a first-half consolidated loss of 10.8 billion Swiss francs ($13.48 billion), with "losses on foreign-currency positions amounting to 9.9 billion francs due to exchange-related valuation losses of around 11.7 billion francs.
The book-loss comes after the Swiss currency gained about 2.5% versus the euro and almost 11% against the dollar, as investors sought shelter from the debt crises in the euro area and the U.S.
The euro and the dollar account for about 80% of the Swiss central bank's currency reserves, so their depreciation over the reporting period weighed on the SNB's balance sheet. The SNB holds 10% of its reserves in Japanese yen.
"The size of the SNB loss is no surprise, given the franc's stellar performance in recent months, but the result will undoubtedly attract criticism from some political quarters," said Alessandro Bee, an economist at Bank Sarasin & Cie.
Most of the loss-making euro and dollar reserves were accumulated in 2009 and 2010 when the SNB tried to slow the franc's relentless ascent versus the European and U.S. currencies, citing the risk of deflation.
The SNB has stressed repeatedly that it is mandated to preserve Swiss price stability, and not generate profits, though Vice President Thomas Jordan said earlier this month the central bank can take measures should deflation risks re-emerge.
"I don't think the SNB will intervene again, unless there is a real danger of deflation, but at the moment that isn't the case," Mr. Bee said.
The populist Swiss Peoples Party earlier this year called on SNB President Philipp Hildebrand to quit after the central bank reported a loss of about 19 billion francs last year.
In addition to the currency reserves, the SNB's gold holdings also took a 1.6-billion francs valuation hit as the metal is priced in dollars, which weakened in the reporting period.
"The result depends largely on developments in the gold, foreign exchange and capital markets, and so strong fluctuations are normal, and only provisional conclusions are possible as regards the annual result," the SNB said.
The SNB's Stability Fund, which contains former illiquid assets from UBS AG, returned a profit of $1.33 billion, and contributed 698 million francs to the consolidated result, it said.
SNB Posts Loss of $10.8 Billion
ZURICH—The Swiss National Bank is likely to come under renewed public criticism after reporting on Friday another hefty book loss owing to the Swiss franc's sharp appreciation against all major currencies.
Switzerland's central bank said it posted a first-half consolidated loss of 10.8 billion Swiss francs ($13.48 billion), with "losses on foreign-currency positions amounting to 9.9 billion francs due to exchange-related valuation losses of around 11.7 billion francs.
The book-loss comes after the Swiss currency gained about 2.5% versus the euro and almost 11% against the dollar, as investors sought shelter from the debt crises in the euro area and the U.S.
The euro and the dollar account for about 80% of the Swiss central bank's currency reserves, so their depreciation over the reporting period weighed on the SNB's balance sheet. The SNB holds 10% of its reserves in Japanese yen.
"The size of the SNB loss is no surprise, given the franc's stellar performance in recent months, but the result will undoubtedly attract criticism from some political quarters," said Alessandro Bee, an economist at Bank Sarasin & Cie.
Most of the loss-making euro and dollar reserves were accumulated in 2009 and 2010 when the SNB tried to slow the franc's relentless ascent versus the European and U.S. currencies, citing the risk of deflation.
The SNB has stressed repeatedly that it is mandated to preserve Swiss price stability, and not generate profits, though Vice President Thomas Jordan said earlier this month the central bank can take measures should deflation risks re-emerge.
"I don't think the SNB will intervene again, unless there is a real danger of deflation, but at the moment that isn't the case," Mr. Bee said.
The populist Swiss Peoples Party earlier this year called on SNB President Philipp Hildebrand to quit after the central bank reported a loss of about 19 billion francs last year.
In addition to the currency reserves, the SNB's gold holdings also took a 1.6-billion francs valuation hit as the metal is priced in dollars, which weakened in the reporting period.
"The result depends largely on developments in the gold, foreign exchange and capital markets, and so strong fluctuations are normal, and only provisional conclusions are possible as regards the annual result," the SNB said.
The SNB's Stability Fund, which contains former illiquid assets from UBS AG, returned a profit of $1.33 billion, and contributed 698 million francs to the consolidated result, it said.
