Published: November 5, 2015
Massive losses for the Swiss National Bank, what lessons learned for others?
The Swiss National Bank’s attempt to keep the value of its currency artificially low resulted in massive losses. It points up a series of home truths for company treasurers and central bankers.
On 15 January this year the SNB abandoned its Swiss franc (CHF) euro (EUR) peg rate of 1.20. It had maintained this cap since 2011. The manner in which it did so, without any prior indication, caused massive over reaction in global foreign exchange markets. When the rate stabilised the remaining wreckage included losses among many currency investors with leveraged positions, losses on bank balance sheets where their exposures were insufficiently hedged and some more vulnerable forex brokerages went out of business.