The Swiss National Bank’s attempt to cap the franc’s gains against the euro has resulted in a 65 per cent expansion of its reserves over the past year. The central bank now holds Sfr421bn in foreign exchange reserves, compared with Sfr255bn at the end of August 2011.
Because of the magnitude of this balance sheet expansion, the cap’s influence has gone far beyond European shores. The latest Cofer data on central banks’ foreign exchange reserves, released by the IMF on Friday, show the significance of the SNB’s cap on a global scale.
According to the data, the total amount of reserves held by the world’s central banks was $10.5tn as of the end of June 2012. They also show the currency allocation for $5.8tn of these reserves (many central banks refuse to declare the currency composition of their FX reserves).
The currency allocation data showed the proportion of reserves denominated in euros had edged up, from 25 per cent in the first quarter of 2012 to 25.1 per cent at the end of June (which doesn’t account for the dollar’s appreciation against the euro). The data suggest that this owes an awful lot to the SNB. Read more