SNB Governor Rejects Idea of Swiss Sovereign Wealth Fund

Swiss National Bank Governor Thomas Jordan flatly rejected the idea of having a Swiss sovereign wealth fund to manage the central bank’s foreign reserves. He believes it would do little to assist Swiss monetary policy let alone the country.

The Swiss National Bank diversifies its foreign currency reserves in a variety of assets including government bonds with high credit ratings, private sector borrowers (bonds), and equity shares. In fact, equity shares compose up to 10% of total foreign currency investments.

The SNB Governor went into detail that the creation of a sovereign fund would not assist in enforcing the minimum exchange rate. Creating a sovereign wealth fund for Switzerland in Thomas Jordan’s opinion would not reduce the country’s exchange rate risk on foreign currency reserve investments.

From a speech he gave, “Third, outsourcing the foreign exchange to a sovereign wealth fund would call into question the independence of monetary policy and the SNB, as well as the freedom of action for monetary policy. The size and composition of the SNB’s balance sheet are a reflection of monetary policy. The SNB must also be in a position to dispose of the assets it has purchased and determine the composition of its balance sheet as required. Only in this way can it conduct an independent and target-oriented monetary policy.”

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