SNB Has No Plans to Adjust Gold Holdings, Zurbruegg Says

The Swiss National Bank plans to keep its gold holdings at their current level and never uses its equity holdings to influence companies, Board Member Fritz Zurbruegg said.

“We are currently considering neither gold purchases nor gold sales,” Zurbruegg was quoted as saying in an interview published in RBS Reserve Management Trends 2013 and released by the Zurich-based SNB in an e-mail.

The SNB’s balance sheet has expanded significantly since the central bank set a cap of 1.20 per euro on the franc in September 2011 to ward off deflation and a recession. The SNB held foreign-exchange reserves totaling a record 438.3 billion francs ($470 billion) at the end of last month, a sum equal to nearly three quarters of the country’s annual economic output. It also holds 1,040 tonnes of gold, Zurbruegg said.

While the bulk of the SNB’s foreign-exchange holdings are in highly rated fixed-income securities, about 12 percent are in equities.

“Our policy is to remain passive and not use our voting rights,” said Zurbruegg, who heads the SNB’s markets division. For its equity investments in a given market, the SNB replicates “appropriate broad-based indices” in that market, he said.

Cap Needed

Zurbruegg reaffirmed the necessity for the ceiling on the franc, saying that without it Switzerland would have suffered a severe recession. Investors buy the franc at times of high uncertainty. The Swiss currency nearly reached parity with the euro in August 2011 in response to an escalation of the debt crisis in the 17-nation region.

There is currently no risk of inflation, making the cap necessary, Zurbruegg said, echoing the SNB’s policy statement last month. The turmoil in the euro area could worsen again, he warned.

“If the eurozone uncertainties increase, we could see new safe-haven flows into the Swiss franc,” Zurbruegg said. “We are ready to intervene if necessary. This means we could build up further reserves.”

The SNB has sought to diversify its reserves, about half of which are held in euros. It started buying South Korean won last year, after expanding into Singapore dollars, Danish krone and Swedish krona previously. Still, together with Australian dollars these currencies only accounted for a total of 4 percent of the SNB’s overall reserves at the end of 2012.

Zurbruegg said the SNB was keen not to disrupt markets via its asset management and was considering expanding its portfolio.

“We permanently look at diversification opportunities, but we do not comment on possible future expansion of our investment universe,” he said.

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