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Switzerland Agrees SNB Profit Distribution

by Ulrika Lomas,, Brussels

25 November 2011

The Swiss Federal Department of Finance (FDF) and the Swiss National Bank (SNB) have recently concluded a new agreement on the distribution of the bank’s profit, covering the financial years 2011 to 2015.

According to the Swiss federal administration, henceforth, and on condition that the distribution reserve is positive, the SNB will make an annual distribution payment of CHF1bn (USD1.09bn) to the Confederation and to the Swiss cantons.

The administration points out in its statement, however, that it is as yet unclear as to when the next distribution payment will take place since the distribution reserve must turn positive again, and this will depend on future developments in the financial markets.

The federal administration explains that: “Under the National Bank Act, the SNB is required to set up provisions from its annual result in order to maintain the currency reserves at the level necessary for monetary policy. The remaining net profit after the allocation to the provisions is, in principle, available for distribution to the Confederation and the cantons."

It adds: “To ensure that distribution flows are smoothed in the medium term, the FDF and the SNB establish the key distribution goals in an agreement that covers several years. This facilitates financial planning for the Confederation and the cantons.”

It continues: “It became necessary to review the previous agreement from 2008 after the distribution reserve turned negative in the 2010 financial year, owing to the SNB's substantial foreign exchange losses. The distribution reserve registered a shortfall of CHF5bn at the end of 2010.”

The administration emphasized that should the SNB's financial situation improve substantially, such that the distribution reserve exceeds CHF10bn, it is planned to increase the distribution payment, the amount of which will be decided by the FDF and the SNB.

TAGS: economics | banking | international financial centres (IFC) | offshore | offshore banking | Switzerland | currency

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