Swiss National Bank Posts $15 Billion Loss as Rate Hikes Hit Bond Holdings

The Swiss National Bank on Monday posted a second quarter loss of 13.20 billion Swiss francs ($15.14 billion) as interest rate hikes by other central banks dented the value of its massive bond holdings.

The SNB lost 8.08 billion francs on its foreign currency positions of 742 billion francs as bond prices fell as investors feared more interest rate hikes by the U.S. Federal Reserve, European Central Bank and others.

Swiss franc
Swiss franc Reuters

The Swiss central bank also lost 3.14 billion francs on its gold holdings in the three months to the end of June, as lower prices cut the value of the 1,040 tonnes of the precious metal it holds.

Profits in First Quarter

The second quarter loss contrasts with a 26.9 billion franc profit in the first three months of 2023, reducing the SNB's half year profit to 13.7 billion francs.

The half year figure was supported by profit of 900 million francs from interest payments mainly from emergency liquidity provided to Credit Suisse and UBS, the central bank said.

Swiss National Bank
Swiss National Bank Wikimedia Commons

The SNB lent 168 billion francs to the banks to first support Credit Suisse and then ease the fallen bank's takeover in a state-orchestrated takeover in March.

As of the end of June, the amount outstanding, which also includes a small amount of COVID-19 credits, was 66.7 billion francs.

The SNB also made a 1.88 billion franc loss from its Swiss franc positions during the second quarter, largely reflecting the resumption of interest payments on sight deposits as part of its more restrictive monetary policy.

It has also been paying interest via SNB bonds and repos as part of its operations to absorb liquidity and steer the market interest rate to its policy rate which it increased last month to 1.75%