Swiss parliamentarians urged rejection of a popular initiative that would curtail the Swiss National Bank’s independence by requiring it to hold a fixed portion of its assets in gold.
Members of the Swiss parliament’s lower house voted 129 to 20 with 25 abstentions today against the plan, which demands that at least 20 percent of the central bank’s assets be in gold. It would also disallow the sale of any such holdings and require all SNB gold be held in Switzerland.
No date for a national vote has yet been set. The government in November also recommended the initiative be opposed, saying it would impinge upon the SNB’s ability to conduct monetary policy. Parliament and the multi-party government issue recommendations on all national referendums as a matter of procedure.
“The corset this initiative wants to put our central bank in is so tight, it would suffocate,” Prisca Birrer-Heimo, a member of the Social Democrats, told lawmakers in Bern. “Gold investments aren’t risk free.”
The balance sheet of the SNB, which owned 1,040 tons of gold as of end March, has expanded due to the currency market interventions it has used to defend the cap of 1.20 per euro on the franc, set in September 2011. The SNB held foreign-exchange reserves of 438.4 billion francs ($500 billion) in April, a sum equal to about three quarters of the country’s annual economic output.
“Accepting this initiative would crimp the bank’s ability to act globally at a particularly sensitive time,” said Dominique de Buman, a member of the Christian Democrats.
Members of the Swiss People’s Party SVP started the initiative and collected the requisite 100,000 signatures last year after failing to get backing for the matter in parliament.
“We need gold to give the Swiss franc a credible backbone,” said Luzi Stamm, a member of the SVP who founded the campaign “save our Swiss gold.”
SNB President Thomas Jordan took the extraordinary step of commenting on politics last year when he urged rejection of the initiative, saying it would crimp the Zurich-based institution’s independence and force it into “large-scale” purchases to meet the required 20 percent threshold.
As of April 2013, more than 70 percent of the SNB’s gold was in Switzerland, with about 20 percent at the Bank of England and 10 percent at the Bank of Canada, according to Jordan.
The initiative “reduces the credibility of the SNB’s policy and limits its ability to act when its necessary,” Finance Minister Eveline Widmer-Schlumpf told the chamber.