Swiss National Bank

Swiss National Bank
(German) Schweizerische Nationalbank
(French) Banque nationale suisse
(Italian) Banca nazionale svizzera
(Romansh) Banca naziunala svizra

Logo
Headquarters	Bern and Zurich
Established	16 January 1906 - 20 June 1907 [1][2]
Chairman	Thomas Jordan
Central bank of	Switzerland
Currency	Swiss Franc CHF (ISO 4217)
Website	www.snb.ch

Headquarters on the Bundesplatz in Bern.

The Swiss National Bank (SNB) is the central bank of Switzerland, and is therefore responsible for the monetary policy of the nation of Switzerland and also for the issuing of Swiss franc banknotes.

The bank is otherwise known as: German: Schweizerische Nationalbank; French: Banque nationale suisse; Italian: Banca nazionale svizzera; Romansh: Banca naziunala svizra, which are the four official languages of the country.

The SNB is an aktiengesellschaft under special regulations, and has two head offices, one is in Bern and the other one in Zurich.

History

The bank formed as a result of the need for a reduction in the number of banks of issue, which numbered 53 sometime after 1826. In the 1874 revision of the Federal Constitution it was given the task to oversee laws concerning the issuing of banknotes. Then in 1891 the Federal Constitution was revised again to entrust the Confederation with sole rights to issue banknotes. The National Bank Law was enforced on 16 January 1906, and the Nationalbank began business activities on 20 June 1907, and is thought then founded sometime during either 1906 or 1907.^[1][2] SNB itself states that it was founded in 1907.^[3]

Sometime during World War I (1914-1917 ^[4]), the bank was instructed to release notes of a small denomination, for the first time, by the Federal Council of Switzerland.^[1]

The Bundesrat devalued the Swiss Franc during 1936, and as a result, there was made available to the Nationalbank, an amount of monies, which the bank subsequently stored in a Währungsausgleischsfonds reserve for the future, for usage in situations of emergency.^[5]

In 1981 the bank participated in research involving Orell Füssli and an optical research group named Landis and Gyr, of matters of banknote design.^[6]

During 1994 the Bank was described as a joint-stock company acting under the administration and supervision of the Confederation. It had eight branches and twenty sub-branches within cantons. The governing board had overall executive management of the Nationalbank, with supervision entrusted to its shareholders, the banks' council, the banks' committee, its local committees and auditing committee. There were three members of the governing board, who together decided the monetary policy of the Nationalbank. Towards the end of 1993, there were 566 employees.^[1]

With the inception of Article 99 of the Federal Constitution, in May 2004, the Nationalbank achieved formal independence.^[7]

Ownership

As of 2015 the Nationalbank was privately owned,^[8] with the majority of shares belonging to cantons (45%) and banks of cantons (15%), and the smaller remainder in the possession of private individuals (40%).^[9][10][11] Shares of the SNB existed within SIX Swiss Exchange from 1907 onward.^[12]

Exchange rates

The Nationalbank made an announcement on 6 September 2011, of its intention to address changes in the value of the Swiss Franc to the Euro. More specifically, that it wanted the value of the Franc to fall below 1.2 to the Euro. A cap was placed on exchange-rates ^[13] in order to take measures to stem the development of a possible recession. The bank stated the 1.2 exchange value was defendable as the bank could potentially proceed to mint enough banknotes to control the rate sufficiently.^[14] The bank announced on January 15, 2015 the Euro currency arrangement would end as the Euro crisis had passed and the Europeans would be making financial policy changes.^[15]

Responsibilities

Schweizerische Nationalbank (Swiss National Bank), 5 Franken (1914). The portrait depicts William Tell (based on Richard Kissling’s monument in Altdorf), with the Rütli Mountain in the distance.
Signed by K. Bornhauser (Chief Cashier), Johann-Daniel Hirter (President of the Swiss National Bank Council), and August Burckhardt (Board member).

The basic governing principles of the Nationalbank are contained within Article 99 of the Federal Constitution, which deals with matters of monetary policy.^[16] There are three numbered factors concerning principles explicitly mentioning the Nationalbank, of four altogether shown within the Article. The SNB is therefore obliged by constitutional statute law to act in accordance with the economic interests of Switzerland,^[17] accordingly, the prime function of the Nationalbank is:^[18]

to pursue a reliable monetary policy for the benefit of the Swiss economy and the Swiss people.

The Nationalbank publishes within its own site a list of research done as work in progress by staff members, which begin at 2004 (2 papers), to 2005 (2), 2006 (11), 2007 (17), 2008 (19), 2009 (16), 2010 (19), 2011 (14), 2012 (16), 2013 (11), 2014 (13), and to 1 August 2015 there is shown nine papers,^[19] a list of eight economic studies which relate to the tasks of the bank, listed from 2005,^[20] in addition to a bi-annually published update of research, listed from 2012 to the present.^[21]

Cash supply and distribution

The National Bank is entrusted with the note-issuing privilege. It supplies the economy with banknotes that meet high standards with respect to quality and security. It is also charged by the Confederation with the task of coin distribution.

Cashless payment transactions

In the field of cashless payment transactions, the National Bank provides services for payments between banks. These are settled in the Swiss Interbank Clearing (SIC) system via sight deposit accounts held with the National Bank.

Investment of currency reserves

The National Bank manages currency reserves. These engender confidence in the Swiss franc, help to prevent and overcome crises and may be utilized for interventions in the foreign exchange market.

Financial system stability

The National Bank contributes to the stability of the financial system by acting as an arbiter over monetary policy. Within the context of this task, it analyses sources of risk to the financial system, oversees systemically important payment and securities settlement systems and helps to promote an operational environment for the financial sector.

International monetary cooperation

Together with the federal authorities, the National Bank participates in international monetary cooperation and provides technical assistance.

Banker to the Confederation

The National Bank acts as banker to the Swiss Confederation. It processes payments on behalf of the Confederation, issues money market debt register claims and bonds, handles the safekeeping of securities and carries out money market and foreign exchange transactions.

Statistics

The National Bank compiles statistical data on banks and financial markets, the balance of payments, the international investment position and the Swiss financial accounts.

Monetary policy

The SNB pursues a monetary policy serving the interests of the country as a whole. It must ensure price stability, while taking due account of economic developments. Monetary policy affects production and prices with a considerable time lag. Consequently, it is based on inflation forecasts rather than current inflation. The SNB’s monetary policy strategy consists of three elements: a definition of price stability (the SNB equates price stability with a rise in the national consumer price index of less than 2% per year), a medium-term conditional inflation forecast, and, at operational level, a target range for a reference interest rate, which is the Libor for three-month investments in Swiss francs.

General Meeting of Shareholders

The General Meeting of Shareholders is held once a year, as a rule in April. Owing to the SNB’s public mandate, the powers of the Shareholders’ Meeting are not as extensive as in joint-stock companies under private law.

Bank Council

The Bank Council oversees and controls the conduct of business by the Swiss National Bank and consists of 11 members. Six members, including the President and Vice President, are appointed by the Federal Council, and five by the Shareholders’ Meeting. The Bank Council sets up four committees from its own ranks: an Audit Committee, a Risk Committee, a Remuneration Committee and an Appointment Committee.

A list of the Bank Council members is published on the SNB website (see: http://www.snb.ch/en/iabout/snb/bodies/id/snb_bodies_council )

Governing Board

The Swiss National Bank’s management and executive body is the Governing Board. The Governing Board is responsible in particular for monetary policy, asset management strategy, contributing to the stability of the financial system and international monetary cooperation. The Governing Board consists of 3 members:

• Chairman: Thomas Jordan^[22]
• Vice Chairman: Fritz Zurbrügg ^[22]
• Member: Andréa M. Maechler

Gold reserves

Switzerland's gold reserves

The SNB manages the official gold reserves of Switzerland, which as of 2008 amount to 1145 tonnes and are valued at 30.5 billion CHF.^[23] The gold is believed to be stored in huge vaults beneath the Federal Square (Bundesplatz) to the north of the federal Parliament building in Bern, but the SNB treats the location of the gold reserves as a secret.^[23] Independent confirmation of the gold's location was obtained by the Bernese newspaper Der Bund in 2008. It published a photograph of the bullion that a keystone photographer was allowed to take at the SNB premises in Bern in 2001. Der Bund also quoted a retired official of the city's surveying office as saying that the gold vaults take up an area of roughly half the Federal Square and have a depth of dozens of meters, down to the level of the Aar river.^[23] The SNB says that the gold reserves are stored in different safe places in Switzerland (70%) and abroad (i.e. Bank of England and Bank of Canada).^[24]

From the latter years of the 1990s until sometime during 2005, the Nationalbank transferred from its possession an amount of gold deemed superfluous.^[5]

World War II

The Swiss National Bank provided 1.2 billion CHF to the Reichsbank, of this, a value of approximately 780 million CHF of the gold given to the Nationalbank was gold which had been looted by the forces of Germany. In addition the Nationalbank also exchanged between 1.2–1.6 billion CHF for gold from the Allied forces.^[25] During 20 April 1944, gold from the gold reserves of Italy arrived from Como at the railway station within Chiasso.^[26]

There is controversy over the role of the Swiss National Bank in the transfer of Nazi gold during World War II. The SNB was the largest gold distribution centre in continental Europe before the war. A study by the U.S. Department of State in 1997 notes that the Bank, "must have known that some portion of the gold it was receiving from the Reichsbank was looted from occupied countries."^[27] This was confirmed by the Swiss Bergier commission in 1998 which concluded that the SNB received US$440 million in gold from Nazi sources,^[28] of which US$316 million is estimated to have been looted. The gold from Nazi governship sources was in the form of ingots containing gold looted from Central Banks of Europe and gold from Jewish persons executed within the concentration camps established by the machination of the Nazi regime, which the SNB took without knowing these facts at the time, nor inquiring to any great degree in the process of its transfer into the possession of the SNB, according to a former Archivist of the SNB Robert Vogler.^[29]

Reports

The Nationalbank had profits of $39.3 billion at the close of 2014.^[30]

On 31 July 2015, the bank reported a first-half loss of £33 billion.^[31]

See also

• Banking in Switzerland
• Economy of Switzerland
• SARON (Swiss Average Rate Overnight)
• Swiss Financial Market Supervisory Authority (FINMA)

Notes and references

External links

• Official website