Swiss National Bank

Swiss National Bank. It is the central bank of Switzerland, responsible for the nation's monetary policy and for ensuring price stability. Established by the Federal Act on the Swiss National Bank in 1905, it began operations in 1907 with its headquarters split between Bern and Zürich. The bank operates as a joint-stock company under special public law, with its shares traded on the SIX Swiss Exchange.

History

The establishment followed decades of debate over monetary order after the dissolution of the earlier Latin Monetary Union. Key founding figures included Johann Jakob Kummer and Federal Councillor Walter Hauser. Its early years were defined by maintaining the gold standard, a policy it adhered to through the First World War and the Great Depression. A pivotal moment came in 1936 with the devaluation of the Swiss franc and the creation of a currency reserve to manage the currency. During World War II, it was instrumental in financing the national Reduit defense strategy and managing transactions with both the Allies and the Axis powers. The post-war era saw it navigate the Bretton Woods system and its collapse in the 1970s, leading to a free float of the franc. The Swiss National Bank Act of 2003 modernized its mandate, formally enshrining price stability as its primary goal.

Organization and governance

The bank has a unique governance structure with headquarters in both Bern and Zürich. The supreme governing body is the Bank Council, whose eleven members are appointed by the Federal Council and the cantonal governments. Day-to-day management is vested in the three-member Governing Board, led by Chairman Thomas Jordan. The current Vice Chairs are Martin Schlegel and Antoine Martin. The bank is audited by the Federal Audit Office and its independence is constitutionally protected, though it must coordinate with the Federal Department of Finance. Its capital is divided into registered shares, with a majority held by public institutions like the cantons and cantonal banks, while the remainder is publicly traded.

Monetary policy

Its primary statutory goal is to ensure price stability, which it defines as an inflation rate of less than 2% per year as measured by the Swiss consumer price index. Since 2000, it has pursued this through a three-month Swiss franc LIBOR target range, transitioning in 2021 to a policy rate based on the Swiss Average Rate Overnight. Its most notable recent action was the abandonment of the minimum exchange rate against the euro in January 2015, an event known as the "Franc shock". The bank also utilizes a negative interest rate policy and stands ready to intervene in foreign-exchange markets to counter excessive appreciation of the franc. Its decisions are announced following quarterly monetary policy assessments.

Foreign exchange reserves and gold

It manages one of the world's largest per capita foreign-exchange reserves, valued at approximately 720 billion USD. These reserves are held primarily in government bonds, equities, and gold. The bank's gold reserves are among the largest globally, with significant holdings stored in its own vaults in Bern and with the Bank of England and the Bank of Canada. A 2014 referendum, the "Swiss gold initiative", which sought to mandate higher gold holdings, was rejected by voters. The management of these vast assets involves several external investment managers and is guided by principles of security, liquidity, and return.

Role in financial stability

Beyond monetary policy, it has a key mandate to contribute to the stability of the Swiss financial system. This involves the analysis of systemic risk and close cooperation with the Swiss Financial Market Supervisory Authority and the Federal Department of Finance. It acts as the lender of last resort to ensure liquidity for systemically important banks in Switzerland and oversees critical financial market infrastructure such as the Swiss Interbank Clearing system. Following the financial crisis of 2007–2008, it implemented measures like the Countercyclical capital buffer and participates in international forums like the Financial Stability Board and the Bank for International Settlements, which is also headquartered in Basel.

Category:Central banks Category:Banks of Switzerland Category:1907 establishments in Switzerland