Sight deposits are currently the by far most important means of financing for SNB currency purchases, for interventions. Sight deposits are assets for commercial banks, the Swiss confederation and other counterparties that deposit money at the SNB, but for the SNB they are liabilities, debt.Sight deposits are always denominated in CHF. The SNB finances itself with Swiss Francs. With a rising CHF the debt relative to assets gets bigger, because the assets lose their value. As consequence the central bank may lose its Owner’s Equity that may lead to a bankruptcy or a recapitalization by the Swiss state.
The IMF-compliant weekly monetary data release on the SNB website provides the recent developments in sight deposits. With this weekly delivery it gives an far earlier indication of SNB interventions than the relatively late releases of balance sheet or IMF data.
Currency in circulation (bank notes and coins) is the second financing method, it represents the typical “money printing” of central bank debt. Nowadays this “bank notes printing” is far less important than the electronic printing of debt called “sight deposits”. Printing is the popular word for unsterilised central bank interventions that – at least for monetarists – paves the way for price inflation.
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Sight deposits are currently the by far most important means of financing for SNB currency purchases, for interventions
. Sight deposits are assets for commercial banks, the Swiss confederation and other counterparties that deposit money at the SNB, but for the SNB they are liabilities, debt
.Sight deposits are always denominated in CHF. The SNB finances itself with Swiss Francs. With a rising CHF the debt relative to assets gets bigger, because the assets lose their value. As consequence the central bank may lose its Owner’s Equity that may lead to a bankruptcy or a recapitalization by the Swiss state.
The IMF-compliant weekly monetary data release
on the SNB website provides the recent developments in sight deposits. With this weekly delivery it gives an far earlier indication of SNB interventions
than the relatively late releases of balance sheet or IMF data
Currency in circulation (bank notes and coins) is the second financing method, it represents the typical “money printing” of central bank debt. Nowadays this “bank notes printing” is far less important than the electronic printing of debt called “sight deposits”. Printing is the popular word for unsterilised
central bank interventions that – at least for monetarists – paves the way for price inflation.
Sight Deposits of Swiss banks:
They are part of M0, the monetary base:With the money multiplier effect
, money on Swiss banks have a higher influence on Swiss lending and inflation. Therefore the two categories are separated. For monetarists, a big rise in Swiss sight deposits would be a bigger issue than the increase of the second item, which is:
“Other Sight Deposits”
of other counter-parties with an account at the SNB.Inside the monetary data release these include loans from the Swiss confederation and federal authorities like the state pension fund (In German “AHV”
Other counter parties are also insurances, private pension funds, settlement agencies, investment companies, foreign banks, foreign central banks and institutions. These other sight deposits are not part of M0, because they are not able to “multiple money” with loans to the public (no money multiplier effect).
Since December, sight deposits above a certain threshold are “punished” with negative rates.
Weekly SNB Intervention Watch: Sight Deposits
Date(+ link to source)
avg. EUR/CHF during period
avg. EUR/USD during period
NEW: Speculative CFTC Position CHF against USD
Delta sight depositswhich is actually SNB intervention
Total Sight Deposits
Sight [email protected]
from Swiss banks
"Other Sight Deposits" @SNB from Non-Swiss cpties
September 18, 2015
0.7 bln. per week
September 11, 2015
Euro rises vs. USD and CHF despite QE thread
0.4 bln. per week
September 04, 2015
ECB threatens more QE
End August 2015
China crisis is negative for CHF and pos. for USD (see more
+3 bln.per month
July 17, 2015
Deal with Greece achieved
+0.8 bln.each week
+3.4 bln.per month
End May 2015
Ascent of EUR/USD with rising German inflation
+5.5 bln.per month
End April 2015
Weak US GDP let Euro and CHF rise.
+6 bln.per month
Euro falls thanks to Greek and Draghi fool game (GR= 1.5% of EU GDP)
End Feb, 2015
Greeks continue fooling Germany
Jan 30, 2015
Greek crisis again: Run to safety continues
Jan 23, 2015
First week after end of peg
End of EUR/CHF peg
-26444x125k(before end peg)
ECB QE Onset, Brent: 47$
Rouble crisis, Brent: 54$
End Nov, 2014
End Oct, 2014
End Sep, 2014
ECB QE Talk taking effect on markets
First ECB easing
-6813x125k(CHF spec.pos turns neg.)
End Q1, 2014
End Q4, 2013
US recovery despite gov. shut-down
Previous Record High
256 bln. CHF (2012/03 to 2013/12)
373 bln.(Nov 2012)
321 bln.(June 2013)
March 16, 2012
Temporary low in sight deposits
-4 bln. (SNB selling Euros)
Markets perceive higher floor thread
-26 bln . (SNB selling Euros)
Sept 16, 2011 (first record)
After establishment of 1.20 floor
+5400x125k(CHF long despite floor)
58.4 bln. (sept 2011)
US Downgrade, ECB intervention
159 bln. (Aug 2011)
SNB absorbs liquidity with SNB bills
-71 bln . (SNB sterilizes via SNB bills)
SNB abandons interventions
May 02 2009
First high during fin. crisis
Italic print: Recent data estimated based on SNB balance
Italic print: Recent data estimated based on SNB balance
Italic print: Recent data estimated based on SNB balance
Full list of Swiss institutions with sight deposits
Italic print: Recent data estimated based on SNB balance sheet of October 2014
Headlines and Comments
The following headlines are added each week. They reflect the movement in the table above.
September 21: Greek elections
When FX speculators hear the word “Greece”, then they often sell euros and buy CHF. That the Greek GDP is only tiny part of euro zone GDP does not matter. Hence one day before the elections,the EUR/CHF fell to 1.09, the EUR/USD was down 0.7%.
Speculative position USD against CHF:
With the Greek elections, speculators went long CHF against USD after being short CHF for the whole August and September.
Total sight deposits rose by another 0.7 billion CHF after 0.4 bln in the previous week.The following tendency continued since August: Foreign and other type of institutions (e.g. hedge funds) remove sight deposits. But the Swiss banks increase sight deposits. Their clients are risk-averse and like to keep CHF cash. Hence the banks are obliged to pay 0.75% interest for this increase of sight deposits.
Are there other explanations than interventions for increased sight deposits?
There are two means of financing for current interventions:1) Sight Deposits (electronic printing)2) Bank notes (“traditional” money printing)
So when cash is converted into sight deposits at the SNB, then this may happen without interventions. But sight deposits increase.
The SNB buys in any case, even if the rate is high. Why?
Yes you are right. But interventions at too high levels, is a potential risk for SNB’s solvability. But why does she do it?
1) If the SNB sells the EUR/CHF or does not buy at all, then the EUR would move downwards. The bank does not like this.2) The SNB wants to support the carry trade, the upwards trend of EUR/CHF.
The conclusion is that the SNB will sell euros from a certain level. In an earlier post, I thought they sell at 1.10 but I got wrong, for now…Remember that the SNB sold euros in early 2012 so that the euro went slowly towards 1.20.
Is it possible that money isn’t credited to an account instantly but after a few days, right? Last week the deposits increased. This could be because of interventions in the last week or the week before, right? But in the last two weeks the Euro-Franc exchange rate was pretty high.
Speculative positions against CHF (CHF short) may be higher than CHF sight deposits (CHF Long). The CFTC position is only a part of the total spec position. Brokers and foreign banks hedge some of their client EUR long positions with SNB sight deposits or indirectly via Swiss banks like UBS. When and how much they hedge
. As January 15th shows, banks are usually not completely hedged.You might get confused with this answer, read more here why sight deposits can be viewed in two ways
, depending who creates them, the central bank SNB or the commercial banks that deposit funds.
Strangely EUR/CHF continues its ascent on September 7, despite the ECB threat with more QE
Until End August
The speculative position against CHF continues to rise, while sight deposits indicate that – net real money
moves into CHF and that the SNB intervenes to counter the inflows. The term Net Real Money
indicates current account surplus minus capital account outflows
(see the balance of payments background
). Capital account outflows are non-FX money – like cash, equities and bonds.
Shortly before January 15th, 2015, the speculative position was at it highest. Remember that all such carry trades
– a strong speculative position that counters real money, collapse one day. In our view, the carry trade should continue until EUR/CHF reaches 1.10 or 1.15. The carry trade could run 3 to 5 years, before it should collapse again to EUR/CHF 0.90
. Time for the SNB to collect some dividends and coupons to avoid a bankruptcy.
July 15th to August, 15th:
Sight deposits have risen by 2.5 bln. in the course of one month. But a big speculative position is building up against CHF. Sight deposits do not capture these movements because they are not portfolio investments for the balance of payments. They happen at FX brokers. But long-term investors still like Swiss stocks
Another 2.1 bln CHF of interventions, a deal with Greece is not yet achieved. Inflows mostly came from local banks They seem not to fear negative rates. This delta in sight deposits, is probably punished by negative rates. But the SNB seems to be convinced to keep EUR/CHF over 1.04, without considering that many exporters (like pharma and chemicals) take advantage of the stronger dollar.
Surprisingly only a small intervention of 1.4 bln. CHF during the Greek referendum week. Reasons might be that the European recovery still avoids inflation. See more in the two phases of CHF appreciation
Greek referendum announced and talks on Greek ended. According to Forexlive.com
, the SNB has intervened. For us, this must have been at the lower area of 1.0312 in Asian trade, but not at 1.04.
The pace of SNB intervention is slowing. Sight deposits rise by 0.5 billion francs per week.
April and May:
Sight deposits rise by 1.5 billion CHF per week, hence the SNB seems to intervene with a pace of 1.5 billion francs weekly. Recently the SNB increased the loans with the Swiss confederation.
Between Feb 21 and April 3: No major change, no SNB interventions
The biweekly bigger IMF data release
will contain infos about money supply, in particular M0, next issue is on May 14th.
The last one, the one for March, is the following:
See more for Featured SNB