Sovereign wealth fund ‘not a good idea’, says the SNB
Keystone-SDA
The Swiss National Bank (SNB) has rejected the idea of a sovereign wealth fund to manage its currency reserves. Not a good idea, said Bank Council President Barbara Janom Steiner at Friday’s general meeting in Bern.
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Supporters of such a mechanism point to juicy returns, to which Janom Steiner replied that the SNB already manages its currencies very professionally and is one of the most advanced central banks in this area. And higher returns also mean higher risks for the SNB, which would see its results fluctuate even more.
She noted that sovereign wealth funds from other countries are often used as benchmarks. “But they cannot be taken as models for Switzerland, because they are financed almost exclusively by revenues from commodities or budget surpluses,” she warned.
Janom Steiner pointed out that foreign exchange reserves do not really represent savings, since they serve the SNB’s monetary policy. If the situation required it, the Swiss central bank could be forced to reduce them, which implies “unrestricted” access to this liquidity. A sovereign wealth fund would invest the reserves to generate a return, so the money would no longer be immediately available.
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Even more unpredictable markets
The independence enjoyed by the SNB in conducting its monetary policy is guaranteed by the Federal Constitution, she emphasised. “This means that it is free to decide on the amount and allocation of foreign currency reserves. To deprive it of access to foreign exchange reserves would in itself be an attack on its independence.”
The creation of a sovereign wealth fund would also pose a problem for the balance sheet, since foreign currency reserves are matched by corresponding liabilities. It would therefore be necessary to finance the transfer of these reserves to an investment vehicle or, more prosaically, the owner of the fund would have to buy these assets from the SNB. Janom Steiner warned that the government would have to take on a great deal of debt in order to carry out this project.
She also warned against the “considerable” risk of politicisation of this sovereign wealth fund, “which does not bode well”.
The other major pressure on the SNB concerns the distribution of surpluses to the government and the cantons. When the central bank decides not to pay out anything, “it is not for lack of goodwill, but because of its financial situation”.
Janom Steiner pointed out that the SNB would continue to give priority to building up its own capital, especially in the current climate of uncertainty. The SNB’s profits are closely linked to the financial markets, which have become even more unpredictable since the United States decided to raise tariffs.
Translated from French by DeepL/ts
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