How Much Can the Swiss National Bank Contribute to the Financing of the Swiss Old Age Insurance (AHV)?

Abstract

The monetary base is the most important monetary policy tool of the Swiss National Bank (SNB) in order to achieve the statutory objective of price stability. The SNB can control the monetary base through the purchase and sale of gold, foreign exchange and domestic debt securities. A purchase of these assets leads to an increase in the monetary base and a sale to a reduction. The attached balance sheet shows the assets acquired by the SNB as part of its monetary policy. At the end of 2017, the SNB owned gold for CHF 42.5 billion; CHF 794.6 billion in foreign exchange; and CHF 4 billion in securities denominated in Swiss francs. The foreign exchange position involves foreign financial assets, including debt securities and shares, while the Swiss franc securities include domestic and foreign debt instruments. The SNB is not active in the domestic stock market, as this would lead to undue state influence on Swiss companies. The liabilities side of the balance sheet shows the financing of the SNB’s investments. Banknotes in circulation amounted to CHF 81.6 billion at the end of 2017 and sight deposits held by domestic banks with the SNB totaled CHF 470.4 billion. Together this results in a supply of central bank money or monetary base of CHF 552 billion. Foreign liabilities, liabilities in foreign currency and the other sight liabilities are not added to the monetary base. The surplus of assets over liabilities results in equity capital. At the end of 2017, the equity ratio of the SNB, which sets equity in relation to total assets, was 16.3 percent.