Economists call on Swiss National Bank to create $ 1 trillion sovereign wealth fund

ZURICH, Dec. 15 (Reuters) – The Swiss National Bank is expected to convert its huge stock of foreign stocks and bonds into a sovereign wealth fund like Norway’s to support government spending, a group of economists said.

The SNB has invested $ 1,000 billion in foreign currency, including shares in Amazon (AMZN.O), Alphabet, owner of Google (GOOGL.O) and Starbucks (SBUX.O), during its campaign to stop appreciation of the Swiss franc.

The exploding balance sheet prompted politicians to ask the SNB to increase its payments to close the funding gap in the public pension scheme.

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Now, a group of academics, who previously said the SNB should increase its annual payment to the government, have said it should transfer its assets to a sovereign wealth fund, an idea the SNB has rejected in the past.

“The income potential of these assets is considerable and could be used to ease the burden on taxpayers,” the SNB Observatory said in a document released Wednesday.

“The value of the SNB’s foreign assets and the return they generate are no longer negligible,” the report said. “Each percentage return on these assets amounts to around CHF 10 billion.”

Norway’s $ 1.3 trillion sovereign wealth fund [RIC:RIC:NOCB.UL], created 25 years ago to share oil and gas revenues with future generations, provided $ 45 billion to his government this year.

The SNB, which made a 2020 profit of 20.9 billion francs, distributed a maximum amount of 6 billion francs, but that figure could be much higher if the money were managed separately, said the Observatory of the SNB.

“There is no reason why a Swiss fund, similar in size to the Norwegian fund and being so well managed, could not have made a payment of 40 billion dollars or more in 2021, it is reasonable” said Charles Wyplosz, professor of economics. at the University Institute of Geneva.

The huge balance sheet risked distracting the SNB from its primary role in directing monetary policy, he added, while doubts could arise over its possible expansion of assets via currency purchases and risk of currency. significant losses.

“The market may not fully believe that the SNB would intervene in a truly unlimited way,” said Yvan Lengwiler, economist at the University of Basel and former SNB economic adviser.

The SNB, which is reviewing monetary policy on Thursday, received the report but has not yet commented, the authors said, wishing to launch a public debate on the creation of a sovereign wealth fund.

SNB Chairman Thomas Jordan said using central bank funds in a sovereign wealth fund would be a “very bad idea” which would undermine its ability to conduct independent monetary policy.

Jordan has also warned against making central banks an instrument of state funding amid the coronavirus pandemic.

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Reporting by John Revill; Editing by Michael Shields

Our standards: Thomson Reuters Trust Principles.

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