ZURICH, Jan 6 (Reuters) - The Swiss National Bank said it would swing to a 9 billion Swiss franc ($9.95 billion) loss for 2013 because of a dramatic drop in the value of its gold holdings.
The loss is likely to be politically charged as its means the central bank cannot distribute dividends to its biggest shareholders, Switzerland’s 26 cantons, or states, or to the federal government.
The SNB said a 15 billion franc loss on its gold, which lost 28 percent of its value last year, could not be offset by a gain of about 3 billion francs from foreign currency and profits of more than 3 billion francs from selling a stabilisation fund set up five years ago to bail out UBS during the financial crisis.
The right-wing Swiss People’s Party (SVP) is forcing a referendum to require the SNB to hold at least 20 percent of its assets in gold, something the central bank has said is misguided.
Last year, the SNB relied on gains from large foreign currency positions it had accumulated to defend the 1.20 per euro ceiling it imposed on the franc in September 2011, as well as a gold price rally, to post a 6 billion franc profit.
The SNB set the 1.20 threshold more than two years ago to stave off deflation and shield the economy from recession. Investors seeking a safe haven from turmoil in the euro zone had pushed the franc close to parity against the euro.
Recent economic data from Switzerland, which has grown steadily under the cap, has raised questions about the continued relevance of the minimum exchange rate.
The SNB kept the currency cap in place at its quarterly monetary policy meeting last month, saying Switzerland’s recovering economy was still vulnerable.
The SNB reports detailed earnings on March 25.