Thursday, September 15, 2011

SNB - 102nd Annual Report

Legal framework
Swiss National Bank - 102nd Annual Report 2009


"...The Swiss National Bank (SNB) carries out its tasks in line with art. 99 (monetary policy) of the Federal Constitution and with the National Bank Act (NBA). Under the terms of art. 99 of the Constitution, the SNB is required to pursue a monetary policy that serves the general interests of the country. In addition, the article enshrines the SNB’s independence and requires it to set aside sufficient currency reserves from its earnings, also specifying that a part of these reserves be held in gold. The objective of both of these elements is to help maintain public confidence in the value of money. Finally, the Federal Constitution also stipulates that the SNB distribute at least twothirds of its net profits to the cantons..."


Sharp increase in gold price

5 Business performance
5.1 Annual result

"...In the course of the year, the price of gold rose to CHF 38,958 per kilogram and closed at CHF 36,687 (2008: CHF 29,640) on the balance sheet date. Only in 1980, when the price for a kilogram briefly exceeded the CHF 40,000 mark, was this precious metal priced more dearly. A valuation gain of CHF 7,329 million was therefore recorded on the SNB holdings of 1,040 tonnes of gold. The SNB earned a further CHF 9 million through its secured gold lending business..."

Composition of currency reserves

In the short term, the currency reserves fluctuate as a result of inflows and outflows of funds as well as valuation changes. The level of currency reserves targeted in the long term reflects the monetary policy requirements.

In connection with the third Central Bank Gold Agreement, the SNB confirmed in August that it was NOT planning to PURCHASE any gold in the foreseeable future.
pg. 121

/Mrt: WHAT? Isn´t the CBGA about limits of selling the CBs gold?/


Balance sheet and income statement

Physical gold holdings consist of gold ingots and gold coins. The gold is stored at various locations in Switzerland and abroad. These holdings are stated at market value. Valuation gains and losses and sales proceeds are reported in
In managing its investment portfolio, the National Bank lends a part of its gold holdings to first-class domestic and foreign financial institutions. It receives interest in return. Gold lending transactions are effected on a secured basis. The gold price risk remains with the SNB. Gold loans are entered in the balance sheet under
net result from from gold transactions and stated at market value inclusive of accrued interest. The valuation result and interest are stated in net result from gold....

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