January 8, 2016 / 7:16 AM / 4 years ago

CORRECTED-UPDATE 2-Swiss National Bank plans payout despite record loss

(Corrects bullet point to 1 bln Sfr payment from 2 bln)

* SNB expects 2015 loss of 23 bln Sfr

* Loss on foreign currency positions amounted to 20 bln Sfr

* Still expects total 1 bln Sfr payment to federal and state govts

By Joshua Franklin

ZURICH, Jan 8 (Reuters) - The Swiss National Bank (SNB) expects cash reserves to cover an annual payment to federal and state governments despite a record loss in 2015 caused by the Swiss franc’s sharp rise, sparing the central bank a potential political backlash.

SNB profits are not part of its monetary policy mandate but the annual payments have sometimes meant the difference between a budget surplus and a budget deficit for some cantons

The 23 billion Swiss franc ($23.06 billion) loss posted on Friday, based on provisional calculations, was largely due to losses on the SNB’s foreign currency holdings given the Swiss franc’s surge when the central bank ended its cap against the euro.

Peter Hegglin, the head of Switzerland’s 26 cantonal finance ministers, said only 12 of 26 cantons had budgeted a full or partial payout.

“So a small majority of the cantons had expected there will be no payout,” he told Reuters. “Had there been no payment then there would have been more pressure on the cantons to save money.”

The loss was another reminder of the cost of last January’s decision to end the cap on the franc against the euro. The franc’s sharp appreciation forced the SNB into losses of 20 billion francs on its foreign currency positions.

But the central bank’s 27.5 billion francs in distribution reserves meant it still expects to dish out 1 billion francs to the federal government and Swiss cantons, or states, plus a 15 franc-per-share dividend.

The SNB, whose shares are listed, is obliged to pay at least two thirds of net profits to the cantons.

The profits of the SNB, which are not part of its monetary policy mandate, have been a delicate political subject since it gave no payout for the first time in 2013.

In the past, the SNB’s annual payment has sometimes meant the difference between a budget surplus and a budget deficit for some cantons. But a record 50.1 billion franc SNB loss in the first six months of 2015 had dampened expectations for a payout this year.

$1 = 0.9973 Swiss francs Editing by Michael Shields and Dominic Evans

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