Switzerland’s central bank, the SNB, reported a first-half loss of 50.1 billion Swiss francs ($US51.79 billion, £33.29 billion) on Friday.
How does a central bank, that can effectively print its own money, get hit with such a loss?
The SNB was the master of its downfall here. The bank’s foreign currency reserves suffered a huge devaluation when it abandoned a policy to cap the value of the franc against the euro earlier this year.
The bank had been buying euros to maintain a minimum exchange rate of 1.20 Swiss francs to the euro.
When it scrapped the policy on January 15, market forces took over and pushed up the value of the franc, devaluing all those recently bought euros at a stroke.
The SNB also took a big loss on gold, which has steadily declined in price this year.
Here are the results:
The bank said in a statement: “The SNB’s financial result depends largely on developments in the gold, foreign exchange and capital markets. Strong fluctuations are therefore to be expected, and only provisional conclusions are possible as regards the annual result.”
The Swiss franc is getting hammered as a result, down 0.4% against the euro today.