Last year the SNB earned 32 times more than the 85 Swiss private banks for twice fewer assets.

This time ‘the Bank of the Swiss Banks’ will just not do fine. Not putting hedges on its foreign exchange exposure is an Invitation for Crime. Rank-and-file incompetence or a more sinister plot elaborated by the Club have to not be ruled out in the St-Gallen-Land.

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The United States unlike other countries (doesn’t set a currency target). The U.S Treasury says this is our currency; you deal with its problems. The problem for the Switzerland National Bank(SNB) is that when you change the complexion at the U.S federal reserve ("inflation not a big deal "aka The Mnuchin moment' in Davos Switzerland) what you get is a much weaker dollar.

The U.S exports its inflation to Europe (one of its characteristic manifestation is through the increase in the European real interest rates) and Europe pulling back, if being left with zero reactivity capacity or real economic output capacity to absorb.

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The next following consequence for the SNB is a Swiss Franc surging against the dollar and euro.


It appears that money will flow again into 'St.-Gallen-Land" and will make the SNB Foreign Assets look 'worse' probably more than they truly are but here is the predicament of Prof. Thomas Jordan : the SNB swings back at a Loss.

We are all conjecturing here, and not saying the 'SNB must trade'- they must rather operate at the least frictional cost. Not putting hedges on its foreign exchange exposure is an Invitation for Crime.

Why would the Swiss absolutely want to pay an in-kind CHF25-100B foreign aid to the foreign countries and hedge funds ?

Simply last year the SNB earned 32 times more than the 85 Swiss private banks (Pictet, Mirabaud, Lombard,, UBP, J Safra...) for twice fewer assets.

Not putting hedges on its foreign exchange exposure is an Invitation for Crime.

Since 2015 The Swiss National Bank (SNB) have indeed been charging a 0.75% fee on large deposits at a core policy aimed at weakening the Swiss franc and boost the velocity of money.

  • The 0.75% negative interest on large deposit comprised only 3 to 4% of the earnings.
  • What the SNB in fact did to weaken the Swiss franc was buying up foreign assets. They even own roughly $90 billion of US companies.

FY2017, the SNB printed $55B profit for $836B of assets on its balance sheet.

By comparison, the 85 Swiss Private Banks (The Pictet , REYL, Landolt & Cie, UBP etc..) put all together printed CHF1.7-1.8B for about CHF1,800B AUM. USD:CHF 0.93

With an enviable position of +$55 billion in the coffers, beating the Swiss Private banks 31-to-1, with an enormous position on foreign assets and amidst the extreme macro conditions in the Eurozone- The SNB does not hedge its currency risk against a Swiss franc appreciation ?

Indeed the glass tower, a long time ago determined that protecting against currency losses would have undesirable monetary policy consequences (and without any evidence proving the point)...

In a pre-electoral period it would be very regrettable that the SNB 'swings' at a loss, indeed because of a large (but failed) experimentation by two professors who do not comprehend their exposure, completely blinded by the glare of their money printer.

I would view a lost at the Swiss National Bank (SNB) as an in-kind subsidy to the foreign countries and hedge funds.