The Swiss central bank has declined to comment following reports that it sold swiss francs for euros in a rare foray into Asian forex markets. The euro had been under downward pressure because of sovereign debt fears in several member states, hitting a 15-month low directly before the intervention. The Swiss National Bank has a stated policy of intervention to weaken the swiss franc while the threat of deflation persists.
Rising gold prices and recovering financial markets have caused a 10bn CHF profit for the Swiss central bank.
Switzerland has exceptionally large gold reserves for the size of its economy, at about 1,040 tonnes, or $35bn. Indeed, the country ranked second in the world in our gold security ranking. The rising value of gold contributed about 7.3bn CHF to the profits. Foreign exchange positions made up much of the rest, at about 2bn CHF.
Swiss central bank governor Phillip Hildebrand has taken a somewhat political stance, defending the universal banking model in an interview with Swiss daily Le Temps. A form of the Glass Steagall Act would not work in Switzerland, he said: wealth management and commercial banking should not be split.
The former banker explained: “The universal banking model represents a form of risk diversification,” quoting difficult periods in the 1980s when one side of the bank had been able to bail out the other. He added that ultra-rich customers needed the full range of investment banking services, for instance to help with mergers and acquisitions involving companies they owned.
Switzerland’s central bank said it will stop purchases of corporate bonds as it joins other countries in starting to withdraw emergency measures.
The Swiss National Bank, which announced plans to buy bonds in March, also held the three-month Libor target at 0.25 percent, as expected. The bank said it will continue to “act decisively to prevent any excessive appreciation” in the Swiss franc.