The Swiss National Bank made a massive profit in 2019, the size of which allowed it to promise the payment of a bonus to the country’s government.

The Swiss National Bank (SNB), Switzerland’s central bank, made a profit of about 49 billion Swiss francs ($50.3 billion) in 2019, according to a statement released on Thursday. The size of its profit was in line with a forecast published by UBS earlier in the week.

The bank promised an extra payment to central and regional governments for the financial years 2019 and 2020, in excess of its usual contribution. The current agreement between the SNB and the government includes an upper limit of 2 billion francs for the annual payout. The SNB will discuss the level of the bonus with the finance ministry.

A Bonus for Switzerland

The payment of a bonus follows a decision by the bank’s executive in September to limit the penalties banks are paying for the cash holdings with the central bank due to the negative interest rate regime. That decision came after sustained criticism from the banking world that negative interest had a crippling effect on their earnings while having an only marginal positive effect overall.

Today’s promise of a bonus to the country will help the government deal with demands from trade unions and taxpayer interest groups. They want more money from the central bank’s coffers for the state pension fund, which struggles to make ends meet as population is ageing while investments in fixed income securities don’t yield much or even anything at all.

Stock Market Surge and Gold Price

Last year’s profits bear the hallmarks of a surge in equity prices. The profit on foreign currency positions amounted to about 40 billion francs, the SNB said. The foreign currency reserves rose in recent years as the SNB pursued a rigorous strategy of preventing the franc from appreciating against the major trading currencies.

The gold price also contributed strongly to central bank profit in 2019. The SNB has always held substantial amounts of bullion and the value of its holdings increased by 6.9 billion francs over the past 12 months.

Distribution Reserve Jumps

The SNB furthermore had a net result on Swiss franc positions of 2 billion francs. The exact figures will be known on March 2, 2020.

With last year’s profit and after the payment of the 2 billion francs, the bank will have a distribution reserve of 86 billion francs. The size of the reserve allows the bank to make the extra payment mentioned. The bank next year will discuss the new profit distribution agreement with the government for the financial years of 2021 through 2025.