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Home Switzerland

6 billion franc Swiss National Bank payment after new agreement

by souhaib
February 1, 2021
in Switzerland
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6 billion franc Swiss National Bank payment after new agreement

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Switzerland’s Federal Department of Finance (FDF) and the Swiss National Bank (SNB), Switzerland’s central bank, have signed a new agreement on how SNB profits can be distributed.

6 billion franc Swiss National Bank payment after new agreement
Source: Swiss National Bank

The new agreement, which applies until 2025, allows for the SNB to make an annual payment of up to CHF 6 billion to the government, should central bank finances permit. Previously, the maximum payment was CHF 4 billion.

The CHF 6 billion payment is made up of a base amount of CHF 2 billion, which is paid if SNB profits are at least CHF 2 billion. On top of this are four further CHF 1 billion payments, which are triggered when retained net profits on the balance sheet exceed the thresholds of CHF 10 billion, CHF 20 billion, CHF 30 billion and CHF 40 billion respectively. This formula is designed to smooth out payments over several years.

Net profits in 2020 are forecast to be CHF 21 billion, which will bring retained profits to CHF 115 billion. This means the maximum payment of CHF 6 billion has been triggered for 2020. The money will be paid to the Federal government and to the cantons.

The payment will only make a small dent in the expected CHF 41 billion public cost of the coronavirus pandemic.

Some have called for the central bank to make larger payments. However, the bank does not always make a profit. It made a net loss of CHF 14.9 billion in 2018. Some years it incurs even larger losses, which means it must maintain sufficient reserves to absorb losses. In addition, profits are not the SNB’s raison d’être. Its primary function is to ensure price stability and create an appropriate environment for economic growth. To maintain focus on this it needs to maintain independence from politics and not be under political pressure to deliver profits.

More on this:
Government press release (in French) – Take a 5 minute French test now

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