In Der Bund, Adrian Sulc comments on the Swiss National Bank’s perfectionism.
Keine andere Schweizer Organisation kommuniziert so professionell wie die SNB, keine andere Organisation kann so gut dichthalten.
Perfectionism is costly.
Der Personalbestand ist in den letzten fünf Jahren um 18 Prozent auf 795 Vollzeitstellen gestiegen. … Die durchschnittlichen Lohnkosten pro Mitarbeiter betragen mittlerweile 155 000 Franken pro Jahr. Dies weil gemäss Nationalbank fast ausschliesslich Spezialisten aus Wirtschaft und IT eingestellt wurden.
In a CEPR discussion paper, Cedric Tille argues that Switzerland’s international linkages have been transformed over the last decade. Abstract:
Over the last decade, the economic linkages between Switzerland and the rest of the world have been transformed. First, merchanting and the chemical industry account for an increasing share of international trade, with chemicals exports expanding robustly in recent years despite the European crisis and the strong Swiss franc. Second, the nature of international financial integration has changed. While private investors drove Switzerland’s financial flows and net foreign assets before the financial crisis, the foreign reserves accumulation by the Swiss National Bank has been playing a major role since. Third, asset prices and foreign exchange movements led to substantial capital losses in foreign assets which fully absorbed the surplus on the current account. Finally, the crisis has weakened the role of foreign trade as an engine of growth and narrowed it across sectors.
On the FT’s Alphaville blog, Matthew Klein reviews Swiss monetary policy over the last years and its effect on the real economy. He concludes that
it seems the SNB’s relentless accumulation of foreign assets has been pointless — at best. More likely, the behaviour qualifies as predatory mercantilism at the expense of the rest of the world, especially Switzerland’s hard-hit neighbours.
In the NZZ, Jürg Müller reports about the developing regulatory framework for fintechs in Switzerland. A proposal by the federal finance department drew—reasonable—criticism by various lobbies and industry associations, including the CFA Society Switzerland.
Die CFA Society Switzerland will das systemrelevante Bankensystem von anderen Finanzdienstleistern trennen. Dafür sei eine präzisere Bankendefinition nötig, als sie heute vorgenommen werde. Nur Banken sollen demnach dem Bankengesetz unterstehen. Finanzdienstleister, die kein traditionelles Bankengeschäft betreiben und keine Liquiditätsrisiken eingehen, sollen einem anderen Regulierungsmodell unterstehen. Dabei sollen je nach Tätigkeit unterschiedliche funktionale Lizenzen zum Zuge kommen – dieser letzte Punkt wird von vielen Vernehmlassungsteilnehmern ebenfalls eingefordert.
Schliesslich identifiziert die CFA Society Switzerland auch zentrale Fintech-Themen, die in der Vernehmlassung aussen vor gelassen wurden. Eine dieser Lücken sei der direkte Zugang zur Schweizerischen Nationalbank (SNB). Aus heutiger Sicht sei nicht ersichtlich, weshalb nur Banken elektronisches Zentralbankgeld halten dürften. Auf Anfrage wollte die SNB zu dieser Forderung keine Stellung nehmen. Andere Zentralbanken wie die Bank of England zeigen sich solchen Ideen gegenüber derweil aufgeschlossen. Auch einzelne Schweizer Ökonomen wie beispielsweise Dirk Niepelt stehen allgemein zugänglichem elektronischem Notenbankgeld positiv gegenüber.
The Swiss National Bank held its annual general meeting of shareholders (web TV). In response to one of the questions posed by shareholders Thomas Jordan suggested (2:58–2:59) that possibly a digital Swiss Franc might be introduced sometime in the future.
The Swiss National Bank has updated its exchange rate indices. In an SNB Economic Studies paper, Robert Müller describes how. The upshot is that the SNB considers the Swiss Franc slightly less overvalued than before. From the abstract:
The key aspects of the revision are: the application of the weighting method used by the IMF, which takes into account so-called third-market effects; continuous updating of the countries incorporated into the index; and calculation of a chained index. The methodological changes in the calculation of the new index have only a slight effect on the development of the nominal index. However, the difference between the nominal and real index (CPI-based) has increased with the new calculation. This is explained by the fact that countries with a greater weighting in the new index have higher average rates of inflation than those whose weighting has been reduced.
In a Bank of England Financial Stability Paper, Olga Cielinska, Andreas Joseph, Ujwal Shreyas, John Tanner and Michalis Vasios analyze transactions on the Swiss Franc foreign exchange over-the-counter derivatives market around January 15, 2015, the day when the Swiss National Bank de-pegged the Swiss Franc. From the abstract:
The removal of the floor led to extreme price moves in the forwards market, similar to those observed in the spot market, while trading in the Swiss franc options market was practically halted. We find evidence that the rapid intraday price fluctuation was associated with poor underlying market liquidity conditions, in particular the limited provision of liquidity by dealer banks in the first hour after the event. Looking at longer-term effects, we observe a reduced level of liquidity, associated with an increased level of market fragmentation, higher market volatility and an increase in the degree of collateralisation in the weeks following the event.
Die Volkswirtschaft 1–2 2017, December 21, 2016. HTML, PDF.
Banning inside money creation would be unnecessary, insufficient, not enforceable, and besides the point. The way forward is to grant everyone access to central bank reserves and let investors choose between reserves and deposits.
The Federal Council informs that the Federal Department of Finance and the Swiss National Bank have agreed on rules that govern how profits of the Swiss National Bank (SNB) will be paid out during the period 2016 to 2020:
Subject to a positive distribution reserve, the SNB will in future pay CHF 1 billion p.a. to the Confederation and cantons, as was previously the case. In future, however, omitted distributions will be compensated for in subsequent years if the distribution reserve allows this.
On a new website, Aleksander Berentsen rejects the Swiss Vollgeld initiative. As an alternative, he suggests the Swiss National Bank should offer transaction accounts for everybody, in line with proposals I have made earlier (see here (2016), here (2015), here (2015)).
In the Handelszeitung (here and here), Simon Schmid reports.
In the NZZ, Michael Schaefer reports about a study that analyzes the portfolio composition of public sector entities and social security institutions. Cantons and the Federation mostly hold cash. The SNB’s portfolio is among the riskiest.
Finanz und Wirtschaft, April 30, 2016. PDF. Ökonomenstimme, May 6, 2016. HTML.
The winners and losers of the current monetary environment are not that easy to identify. Investors holding long-term, non-indexed debt gain as unexpectedly low inflation shifts wealth from borrowers to lenders. Governments suffer from increased real debt burdens and reduced revenue due to effectively lower capital income tax rates. Policies that succeed in affecting the real exchange rate entail redistribution.
In the NZZ, Thomas Fuster reports about a consequence of the introduction of new banknotes in Switzerland: Old notes become invalid after a transition period of 20 years.
Nach der Emission des letzten Notenwerts einer neuen Serie kündigt die Schweizerische Nationalbank (SNB) jeweils den Rückruf der alten Serie an. Danach können die Banknoten zwar noch während zwanzig Jahren bei den Kassenstellen oder Agenturen der Nationalbank zum Nennwert umgetauscht werden. In der Folge sind die Noten aber wertlos – oder haben bestenfalls noch Sammlerwert. Eine solche Guillotine fällt das nächste Mal am 30. April 2020. Nach diesem Datum wird die Ende der 1970er Jahre ausgegebene sechste Banknotenserie, von der Ende vergangenen Jahres noch immer 1,14 Mrd. Fr. im Umlauf waren, ihren Geldwert verlieren.
In jusletter.ch, Corinne Zellweger-Gutknecht argues that the legal status of central bank reserves is more equity- than debt-like—at least as far as the Swiss National Bank (SNB) is concerned. According to Zellweger-Gutknecht, reserves constitute debt only if the SNB is legally obliged to redeem them in exchange for central bank assets.
If the SNB purchases dollars against Swiss Francs in an open market operation, it creates reserves which are equity-like. But if it acquires dollars against Swiss Francs and is committed to engage in a reverse transaction in the future (a swap), then it (temporarily) creates reserves which are debt-like.
Finanz und Wirtschaft, January 20, 2016. PDF. Ökonomenstimme, January 21, 2016. HTML.
The public’s perception of central banks has changed during the crisis—and has created expectations that cannot be met. Beyond the buzzwords, the fundamental options for monetary policy makers are the same as always.
On the blog insideparadeplatz, Marc Meyer criticizes the Swiss National Bank’s policies. He also proposes to convert the Study Center into a home for asylum seekers (since the academic staff and visitors are useless anyway) and to pay a large lump sum to each refugee. The motivation and the line of argument remain somewhat unclear.
The Swiss National Bank has published information about its June 2015 balance sheet positions. The graph (excel file) depicts the evolution of foreign currency investments and sight deposits since 2010.