SNB records $8.7 billion loss on Swiss franc gains

The Swiss National Bank recorded a loss of Sfr8.46 billion ($8.7 billion) for the first three quarters of 2010 to 30 September due to exchange rate-related losses, the central bank said on Friday.

Losses on its foreign currency position totalling Sfr14.7 billion wiped out gains on gold holdings amounting to Sfr4.6 billion, and Sfr2.3 billion-worth of earnings from its stabilisation fund, a special purpose vehicle that houses the toxic assets of UBS, Switzerland's biggest bank.

The recorded loss in its foreign currency position owed to an appreciation in the Swiss franc which resulted in exchange rate losses on foreign currency investments at the central bank totaling Sfr21.2 billion. However, this was partly offset by interest and dividend income as well as price gains totalling Sfr6.6 billion. The central bank invested heavily in euros earlier in the year in a bid to suppress the single currency's depreciation against the Swiss franc.

The Swiss franc gained 10.3% against the euro, 7.9% against the pound, and 5.4% against the greenback between 31 December 2009 and 30 September 2010. The Swiss franc traded at 0.9741 to the dollar at 14:42 London time on Friday. The central bank more than doubled its foreign currency investments this year from Sfr94.7 billion to Swfr216.8, an increase of Sfr122.1 billion. Meanwhile the price of gold gained 12% in Swiss franc terms over the three quarters raising the price of a kilo from Sfr36.687 to Sfr41,071. As of 30 September, the value of the SNB's total gold holdings amount to Sfr41.9 billion.

The reported loss comes on the back of a Sfr1.5 billion profit during the first quarter of 2010 led by gains in gold and the central bank's stabilisation fund investments.