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SNB Balance Sheet Now Over 100% GDP

Summary:
Since 2008 the balance sheet of the Swiss National Bank has risen from 28% to 102% of Swiss GDP. Balance sheets of other central banks have strongly risen, too. But there is one big difference: The risk for the SNB is far higher, the SNB nearly exclusively possesses assets denominated in volatile foreign currency. SNB balance sheet now over 100% of GDP It should be remarked that the SNB assets are volatile FX investments. FX investments are less than 3% of the BoJ, ECB, Fed and BoE balance sheet. Central banks from Emerging Markets typically buy foreign bonds. But these countries have far higher inflation and therefore – over time – a weaker local  currency. But the Swiss Franc is a currency that by tendency appreciates. SNB runs a massive currency risk  SNB: From 40% in 2012 to 102% of GDP. Nearly all volatile assets in foreign currency. Bank of Japan: Still increasing asset purchases. Only 2% of assets in foreign currency. The Japanese private sector owns foreign currency bonds, but not the central bank. ECB: Since Mid 2014, rising asset purchases. Has few foreign assets. Fed: Stopped asset purchases in 2015. Bank of England: % of GDP remained flat since 2013. The BoE no assets in foreign currency. People’s Bank of China Stopped strong asset purchases in 2011.

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Since 2008 the balance sheet of the Swiss National Bank has risen from 28% to 102% of Swiss GDP. Balance sheets of other central banks have strongly risen, too. But there is one big difference: The risk for the SNB is far higher, the SNB nearly exclusively possesses assets denominated in volatile foreign currency.

SNB balance sheet now over 100% of GDP

It should be remarked that the SNB assets are volatile FX investments.

FX investments are less than 3% of the BoJ, ECB, Fed and BoE balance sheet.

Central banks from Emerging Markets typically buy foreign bonds. But these countries have far higher inflation and therefore – over time – a weaker local  currency.

But the Swiss Franc is a currency that by tendency appreciates.

SNB Balance Sheet 2016

SNB runs a massive currency risk 

SNB: From 40% in 2012 to 102% of GDP. Nearly all volatile assets in foreign currency.

Bank of Japan: Still increasing asset purchases. Only 2% of assets in foreign currency. The Japanese private sector owns foreign currency bonds, but not the central bank.

ECB: Since Mid 2014, rising asset purchases. Has few foreign assets.

Fed: Stopped asset purchases in 2015.

Bank of England: % of GDP remained flat since 2013. The BoE no assets in foreign currency.

People’s Bank of China

Stopped strong asset purchases in 2011.  Has a high currency risk because the assets are mostly in US Dollar and some Euro. However China is a country in development, with typically higher inflation rates. This reduces the currency risk.

Central Bank Balance Sheet as percentage GDP

(see more posts on SNB balance sheet, on Central Bank Balance Sheets)

Balance Sheet in percent GDP

Source American Inflation Association

Total Assets of Major Central Banks

The Fed, ECB, BoJ and BoE bought assets in their own currency, while the PBoC bought mostly dollars in order to prevent a stronger appreciation of the yuan.

Balance Sheet Fed BoJ SNB ECB BoE

The SNB buy foreign assets
while the BOJ does not

whereas the Japanese possess only 3% foreign assets, see more details.

SNB vs. BoJ Balance Sheet

SNB vs. BoJ Balance Sheet

George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.

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