Swiss National Bank Admits It Spent $470 Billion On Currency Manipulation Since 2010

By now it is common knowledge that when it comes to massive, taxpayer-backed hedge funds, few are quite as big as the Swiss National Bank, whose roughly $100 billion in equity holdings have been extensively profiled on these pages, including its woefully investments in Valeant and the spike in its buying of AAPL stock at its all time high.

But while the SNB’s stock holdings are updated every quarter courtesy of its informative SEC-filed 13F (we wish the Fed would also disclose the equities it holds courtesy of its Citadel proxy), getting a gllimpse of the flow is more problematic, and involves waiting for the hedge fund’s, pardon central bank’s annual report.

Earlier today patience was rewarded when the SNB filed its 108th annual report, in which it disclosed that it spent CHF 86.1 billion or $88 billion, on current interventions last year, a measure of its efforts to shield the economy from deflation.

As Bloomberg reports, SNB President Thomas Jordan and his colleagues have repeatedly pledged to step in to prevent the franc from strengthening. They’ve done so even since they gave up a minimum exchange rate of 1.20 per euro in January 2015 on the grounds the interventions required to sustain it were out of proportion to the economic benefit.

This is how the SNB explained its intervention:

 In order to fulfil its monetary policy mandate, the SNB may purchase and sell foreign currency against Swiss francs on the financial markets. Foreign exchange transactions can be conducted with a wide range of domestic and foreign counterparties. The SNB accepts well over 100 banks from around the world as counterparties. With this network of contacts, it covers the relevant interbank foreign exchange market. The Singapore branch office facilitates round-the-clock foreign exchange market operations, if necessary.  

In 2015, the SNB purchased a total of CHF 86.1 billion of foreign currency, with the vast majority of foreign currency purchases being made in January. During the remainder of the year, the SNB also remained active in the foreign exchange market in order to influence exchange rate developments, where necessary.

This announcement was an odd departure from SNB protocol: Swiss policy makers rarely state outright that they’ve intervened, and analysts use data on sight deposits and foreign currency reserves to gauge the scope of the central bank’s actions. Breaking with the usual protocol, Jordan said in June the SNB had acted to stabilize the franc amid the Greek debt crisis.

The 2015 figure compares with 25.8 billion francs spent on interventions in 2014 and 188 billion francs in 2012. The SNB made no foreign-currency purchases in 2013.

In other words, as shown in the chart below, the SNB has spent a total of $471 billion to intervene in currency markets since 2010, amounting to two thirds of the country’s GDP, and in the end failed after the drain simply became too big.

And yet somehow “analysts” think that where Switzerland failed, China will be able successful in maintaining its closed capital account.

The Swiss National Bank will probably stay on hold at its monetary policy meeting on March 17 as banks in the country are already facing pressure from negative interest rates, economists and strategists say in notes to clients.

The fact that the euro remained broadly stable against Swiss franc after the European Central Bank meeting lessens pressure on the SNB to act this week. SNB may intervene in the forex market to stem the franc’s appreciation.


The measures that the ECB announced in March are no doubt increasing pressure on SNB to cut interest rates again, a team of economists, including Christoph Weil, write in a note to clients.

That said, Commerzbank still sees a probability of a move at well below 50 percent as the SNB will probably cut rates further only in an extreme situation.

The negative interest rates are already imposing a noticeable burden on Swiss banks and a flight to cash could no longer be ruled out with another rate cut. The SNB will only lower the key rate further if recent ECB decisions exert lasting pressure on franc and the bank has to intervene on the forex market in much greater volumes than before.


The SNB is likely to stay on hold and fight any appreciation in the franc through intervention in the forex market, team of strategists including Kathrin Goretzki say in a note to clients. The bank has some more wiggle room to further cut rates but, at some point, more negative rates may fuel a flight to cash which wouldn’t be intended by the SNB. SNB President Thomas Jordan will once again stress that the central bank will intervene in the market if necessary as it has apparently been the case during the last few weeks given the increase in sight deposits.

Credit Agricole

It’s too early for the SNB to consider lower rates as the euro is broadly stable against the franc, team of strategists including Valentin Marinov, write in a note to clients.

The franc remains a sell on rallies as the central bank is likely to keep all the options open regarding lower rates. SNB is also likely to continue to threaten with direct intervention in the currency market if needed.


The appreciation of the euro has to some extent alleviated the pressures for SNB to react with stronger measures, team of strategists including Nikolaos Sgouropoulos, write in a note to clients. Barclays expects the bank to keep all the policy parameters unchanged this week.

Any appreciation of the franc against the euro in a context of bold future ECB bank action and/or rising concerns over EU political cohesion presented by U.K.’s referendum, could force the SNB’s hand, leading it to reduce the exemption from negative deposit rates that it gives on the majority of domestic banks’ reserves.

The timing of such a policy move remains quite uncertain.


SNB is likely to keep the policy on hold for now, barring any renewed franc strength following the last ECB meeting, strategists Jordan Rochester and Yujiro Goto write in note to clients.

Nomura continues to expect the franc to weaken this year and may look to take advantage of any currency gains after the March 17 meeting. Strategists expect a limited reaction to an unchanged policy as the market pricing for a cut has been significantly reduced.

BNP Paribas

SNB is likely to leave policy rates unchanged this week, economist Ken Wattret writes in a note to clients. The stronger-than-expected gross domestic product growth in the fourth quarter last year and the recent pickup in inflation rates favor a continuation of the status quo.

The high level of foreign currency reserves remains a concern, but the reorientation of the EBC policy away from the negative policy rates should ease pressure on euro against the franc.

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