ZURICH (Reuters) – The Swiss National Bank is too stingy in its annual payouts, a group of economists have said, and without loosening the purse strings could face political pressure to fund spending that could compromise its independent monetary policy.
The SNB has made a profit of about 170 billion Swiss francs ($189.10 billion) since 2005 from its pile of foreign currency assets acquired during its campaign to stem the rise of the Swiss franc.
But it has distributed only 35 billion francs to the Swiss national and regional governments, putting the rest into its distribution reserve and foreign currency provisions which together constitute the central bank’s equity.
“This is strikingly little,” said a report published on Wednesday by the SNB Observatory, a group of academics and economists in Switzerland.
The SNB kept back the remainder to cover possible losses from its foreign currency holdings, and to enable it to make consistent payments in lean years.
Critics argue the SNB could distribute much more without jeopardising its stability and to do so would reduce calls to fund individual projects like a recent demand to support the state pension scheme.
“It is uncontested the SNB needs capital because it operates a volatile portfolio…but the SNB is accumulating provisions which it doesn’t use,” said Yvan Lengwiler of the University of Basel, a former economic advisor to the SNB.
“There should be a mechanism for all the profits the SNB generates and does not need being distributed,” he added. “We are not talking about peanuts here.”
Not increasing the payout could increase pressure on the SNB to change from politicians wanting to fund their favourite projects.
“The SNB is not happy to change, but at some point people will start getting upset,” said Charles Wyplosz of the Graduate Institute in Geneva. “There are continuous proposals to do this or that with the SNB’s money, most of which are ill thought-out or potentially dangerous.”
A general payout policy was separate from monetary policy, he added.
The SNB, which is due to give its latest monetary policy update on Thursday, said making and distributing profit was not its purpose as it pursued a monetary policy in the interest of the whole of Switzerland.
“The formation of reserves or equity capital and thus the financial stability of the institution must take priority over distributions at the national bank,” a spokesman said.
($1 = 0.8990 Swiss franc)
(Reporting by John Revill)
