Nearly three years after Switzerland's central bank ditched its peg on the franc, how have Swiss banks copes with «Frankenshock»? finews.com tallies unexpected side effects of the monetary cocktail.
The date went down in history: on January 15, 2015, Swiss National Bank head Thomas Jordan lifted a cap on the franc, preventing the Swiss currency from rising further than 1.20 against the euro. The cap had been introduced by his predecessor Philipp Hildebrand, now a vice-chairman at asset manager Blackrock.
The franc surged immediately, at times trading as high as 0.80 francs to the euro. The SNB's sudden surrender sent shockwaves through foreign exchange dealing rooms around the world, sowing chaos and incurring huge losses.
After the dust had settled, investors woke up to the fact that the Swiss franc's surge absent the cap or the SNB's defense of the currency was extremely bad news for Switzerland's corporations – and financial firms in particular. The bulk of Swiss banks' spending is in Swiss francs, while the majority of their revenue is in U.S. dollars, euros, or other currencies. Banks faced an immediate, huge hit to their profits from the move.
In a bid to weaken the franc, the SNB pushed rates on sight deposits – money lodged with the central bank – to -0.75 percent, and bumped its three-month Libor rate to -1.25 percent. The negative interest rate regime has held since then, with little relief in sight.
The SNB is still administering this monetary cocktail – prompting Swiss banks into action. In a analysis of these events, finews.com highlights eight unexpected results of 2015's «Frankenshock».
- Page 1 of 5
- Next >>
