Swiss National Bank Hits Jackpot with Stock Investments, Holdings Surpass 1 Trillion Swiss Francs

Despite Bond Losses in the First Half, Holdings Increased by 43 Billion Swiss Francs Due to Stock Gains

[Photo by Reuters]

[Asia Economy Reporter Park Byung-hee] Major foreign media recently reported that the Swiss National Bank (SNB)'s asset holdings have exceeded 1 trillion Swiss francs (approximately 1273 trillion won) for the first time in history.

The SNB earned over 43 billion Swiss francs in profits in the first half of this year as the prices of U.S. stocks it holds rose, significantly increasing its holdings. While central banks usually hold government bonds, which are safe assets, as their assets, the SNB made a big hit this year by holding a large amount of stocks as assets. The SNB invests about one-quarter of its assets in foreign stocks.

Conversely, the SNB incurred a loss of 11.8 billion Swiss francs in bond assets in the first half of this year. This was because the yield on the U.S. 10-year Treasury bond, which was below 1% at the end of last year, rose to around 1.7% at one point, and major global bond prices showed weakness this year. An increase in bond yields means a decline in bond prices.

As a result of operating a monetary policy different from other central banks, the SNB quickly increased its holdings by offsetting bond losses with stock gains.

The SNB has actively engaged in financial investments since 2015. The Swiss franc was recognized as a safe asset, attracting investment funds, which led to the Swiss franc's appreciation.

As the U.S. and Eurozone central banks lowered benchmark interest rates and implemented large-scale quantitative easing in response to successive financial crises, the Swiss franc showed a long-term strength. To curb the Swiss franc's appreciation, the SNB made large-scale investments in financial assets such as foreign stocks. As a result, the SNB has become a major shareholder in U.S. big tech companies like Apple, Facebook, and Microsoft. Although the SNB has consistently intervened in the market, the Swiss franc has appreciated more than 6.5% against the dollar and 1.5% against the euro over the past five years.

As of the end of June, the SNB's asset holdings amounted to 1.04 trillion Swiss francs. This level is comparable to the asset size of China's sovereign wealth fund, China Investment Corporation (CIC), and is larger than the size of Switzerland's domestic economy. Switzerland's gross domestic product (GDP) was 824 billion dollars (approximately 950 trillion won) as of the first quarter of this year.

With the SNB's assets greatly increasing, there are calls to raise the amount of contributions allocated to the government. In January, the SNB raised the contribution limit that can be allocated to the government from 4 billion Swiss francs to 6 billion Swiss francs.

However, the SNB has taken a negative stance on further increasing the contribution limit. This is because the SNB's investment returns are highly volatile and its asset holdings must be prepared for potential future financial crises. The SNB also emphasizes that its investments are not for profit but for the stable management of the Swiss franc.

The SNB stated that it will particularly pay attention to the possibility of the U.S. Federal Reserve (Fed) raising its benchmark interest rate. An increase in the U.S. benchmark interest rate would cause the dollar to strengthen, reducing the need for the SNB's financial market intervention and potentially leading to losses on the U.S. stocks it holds.

This content was produced with the assistance of AI translation services.