The Swiss National Bank (SNB) is one of the largest and most powerful central banks in the world. It is the central bank for the Swiss Confederation, consisting of 26 cantons and two full-fledged cities, Bern and Basel. The SNB is a Swiss federal agency that is responsible for monetary policy and for the management of the Swiss National Bank. Its main goal is to ensure price stability and maximum domestic economic prosperity.
The role of the Swiss National Bank (SNB) is important to the world’s economy, since it is the central bank of Switzerland. It is also important to the investment world, since the SNB’s powers are derived from the Swiss Federal Constitution. The SNB has the power to control and manage the Swiss franc, as well as the power to regulate and manage the Swiss stock exchange. The SNB is one of the world’s leading central banks and it is recognized as such by the International Monetary Fund (IMF) and the World Bank.
The SNB is the central bank of Switzerland and the Bank of International Settlements, a bank for central banks. It was created as a privately owned bank in 1930, and is now a part of the country’s federal administration.
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What the Swiss National Bank (SNB) does is not entirely clear to many Swiss. Therefore, I thought it would be interesting to research this topic and write about my findings.
The Swiss National Bank is also well known abroad, but what does it actually do? Is that why we have no interest in our bank accounts?
Let’s see what this central bank is doing. We will also see that the Swiss National Bank has some unique features.
Swiss National Bank
The Swiss National Bank (SNB) is the central bank of Switzerland. This bank is responsible for the production of Swiss franc banknotes and denominations. They are solely responsible for the country’s monetary policy. Its main objective is to maintain price stability (inflation) and contribute to the prosperity of the country’s economy. They are legally obliged to monitor price stability. The SNB must avoid both hyperinflation and severe deflation.
The NSV was only founded in 1906. Previously, many banks could issue banknotes and the Federal Council was responsible for monetary policy. The Swiss National Bank is an independent organisation responsible for both. They must therefore keep a sufficient number of notes in circulation and ensure that they are properly secured. They are responsible for updating the banknotes over time.
The Swiss National Bank has two seats. The first is in Bern, the capital of Switzerland. And the second is Zurich, the unofficial economic capital of the country.
The Swiss National Bank has other tasks. For example, it manages Switzerland’s gold reserves. At the time of writing, it is worth about CHF 30 billion. It is interesting to note that we do not know exactly where this reserve is located. However, most of the gold would be located under the Bundesplatz in Bern. The SNB is also responsible for managing the country’s foreign exchange reserves. It also invests its reserves in the stock market, with a portfolio of approximately CHF 150 billion. Many follow the trading operations of the SNB.
If the SNB makes a profit, it distributes it among the Federal State and the cantons. In recent years, the Swiss National Bank has performed well, both in terms of its gold reserves and its investment portfolio.
It is interesting to note that the SNB’s balance sheet will amount to approximately CHF 850 billion as of 2020. That’s more than the country’s GDP. This makes the SNB the central bank with the largest balance sheet in the world relative to GDP.
Unlike many other countries, the SNB is a private organisation. It is mainly owned by public shareholders such as the cantons and the cantonal banks. In fact, SOEs hold more than 77% of the shares. The remaining shares are held by private investors or traded on the stock exchange. That’s right. The Swiss National Bank is listed on the Swiss Stock Exchange. However, listed shares do not carry voting rights.
The NSC is managed by a supervisory board. This council decides on the country’s monetary policy. To this end, they shall assess the state of the economy and the inflation outlook in Switzerland. They conduct quarterly evaluations. The council is currently chaired by Thomas Jordan. This balance consists mainly of foreign currencies, gold and equities.
NSC tool
The Swiss National Bank has several instruments at its disposal to implement its monetary policy.
The main instrument is the liquidity that the SNB makes available to the banks. It may reduce or increase the amount of liquidity it provides to banks by changing the interest rate on such loans. The banks can in turn lend this money to their customers. The availability of credit can have a major impact on the economy.
The SNB is also able to rescue banks in the event of shocks. They did so during the financial crisis of 2008-2009 to save UBS, the largest Swiss bank. To this end, they bought 54 billion Swiss francs of bad assets from UBS to ensure that the latter had sufficient liquidity. A few years later the SNB managed to sell these assets and even made a profit.
The SNB can also buy and sell Swiss francs against other foreign currencies. This keeps the exchange rate of the Swiss franc at an acceptable level, allowing the Swiss economy to flourish.
The SNB also works closely with FINMA (the banking regulator). In fact, banks are required to deposit money in the Swiss National Bank. Swiss banks have reserve requirements. These reserves must be kept as liquid as possible by SNB. After the 2008 financial crisis, FINMA increased the reserve requirement to avoid another bailout.
The Swiss National Bank may also use more modern methods, such as quantitative easing (QE). Quantitative easing is a method of buying up bonds to inject liquidity directly into the market. However, this is beyond the scope of this article.
Negative interest rate
As already mentioned, maintaining inflation at an appropriate level is one of the main tasks of the Swiss National Bank. Its current objective is to keep inflation in Switzerland at 2%.
One of the tools to fight inflation is to change the interest rate that banks have to pay. The banks are obliged to deposit large sums of money with the Swiss National Bank. And the SNB has a fixed interest rate on this money. This interest rate is currently negative at -0.75%. This means that Swiss banks pay the Swiss National Bank to keep their money in its vaults.
In return, Swiss banks must find a way to pay for these high costs. However, since most banks do not want to charge their customers a negative interest rate, they charge a fee instead. That is why there are only a few free banks left in Switzerland. This is the reason why these Swiss banks charge their customers an interest rate of zero.
Should we blame the Swiss National Bank? Not really. Negative inflation is not necessarily good for the economy in the long run. So keeping inflation at a healthy level is a good thing. When inflation returns to higher levels, we can expect interest rates to rise again. But it will be many years before we see him again.
Establishment of the euro currency
You are probably aware of the limit of 1.2 Swiss francs per euro that the Swiss National Bank has been applying for some time. Needless to say, this currency pairing has caused a stir at home and abroad.
In 2011, the SNB decided to peg the Swiss franc to the euro at a rate of 1 euro for 1.2 Swiss francs. The reason for this link was to support Swiss exports. After all, if the Swiss franc is too strong, it becomes problematic to export anything from Switzerland because our products are too expensive for foreign countries. The SNB has therefore decided to help the economy by introducing this anchor.
But in 2015, the SNB ended the currency peg. The Swiss National Bank was overwhelmed with the task of maintaining the anchor. Linking one currency to another is indeed expensive and complicated.
Supplement
If you are interested in the Swiss economy and banking, you may want to learn more about the role of the Swiss National Bank. Compared to other central banks, the Swiss National Bank is quite unique. Most central banks are state-owned, while the SNB is owned by the cantons, is completely independent of the Swiss Confederation and is even listed on the Swiss Stock Exchange.
The SNB’s main task is to maintain price stability in Switzerland by preventing both high inflation and significant deflation. It does this by managing the liquidity provided to banks and thus influencing the economy. The interest on this cash is currently negative to stimulate inflation, which has been very low in recent years.
Although it is in the interest of the economy, the SNB has indirectly caused significant price increases for Swiss banking services over the past decade. It is therefore difficult to find free banks in Switzerland. If you are looking for such a bank, you will find the best Swiss banks here.
What about the Swiss National Bank?
If you want to follow the activities of the SNB, you can read its press releases. And if you want to know more, you can watch a video made by the Swiss National Bank itself:
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Sir, I want to thank you for your support. Poor Swiss is the author of thepoorswiss.com. In 2017, he realized he was caught up in lifestyle inflation. He decided to reduce his expenses and increase his income. This blog tells his story and his conclusions. In 2019, he set aside more than 50% of his income. His goal is to become financially independent. Here you can send a message to Mr. Send Bad Swiss.The Swiss National Bank (SNB) is a central bank of Switzerland that was founded in the year 1805. The bank was originally named the Swiss National Bank. The bank was founded by the Swiss government and has its headquarters in Bern, Switzerland. The bank was originally founded as part of a system of private banks that were created to manage the Swiss gold reserves. The bank traces its origins to the German-speaking Swiss Confederacy of the Helvetic Republic that existed from 1291 to 1803.. Read more about swiss national bank headquarters and let us know what you think.
Frequently Asked Questions
Is Swiss National Bank independent?
The Swiss National Bank is independent from the Swiss government.
When was the Swiss National Bank founded?
The Swiss National Bank was founded in 1891.
What is Switzerland’s central bank?
The Swiss National Bank is the central bank of Switzerland.
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