John Revill

ZURICH, (Reuters) – A group of economists recommended that the Swiss National Bank convert its large pile of foreign stock and bonds to a sovereign fund like Norway’s for support of government spending.

SNB invested $1 trillion in foreign currencies during campaign to end appreciation of Swiss Franc.

Political leaders have called on the SNB for an increase of its payouts in order to plug the funding gap within the state’s pension system due to its explosive balance sheet.

Academics have suggested to SNB that it increase the annual payment to government. Now, they suggest the SNB shift assets into a sovereign funds, something the SNB rejected previously.

In a Wednesday paper, the SNB Observatory stated that these assets have a significant earnings potential and can be used to reduce the tax burden.

The report stated that “the value of SNB foreign assets is not negligible” and added, “The return they generate is not negligible anymore.” The return on these assets is approximately 10 billion Francs per cent.

Norway’s sovereign wealth fund of $1.3 trillion, established 25 years ago in order to share future oil and gas revenue with Norway, has provided $45 billion this year for the government.

SNB reported that it made a profit of 20.9 Billion Francs for 2020. It paid out a maximum of 6 Billion Francs. But, the SNB Observatory stated that this amount could rise if each money were handled separately.

Charles Wyplosz of The Graduate Institute of Geneva said, “There’s no reason that a Swiss fund of similar size as the Norwegian one and with as good a management could have not made a payout in 2021 of $40 billion or higher, that’s fair.”

He said that the SNB’s huge balance sheet could distract it from its primary role in steering monetary policy. However, doubts may emerge about whether or not it will continue to expand its assets via foreign currency purchase and take on large losses.

“The market might not believe that the SNB will intervene in a truly endless fashion,” stated Yvan Lengwiler (an economist at the University of Basel who was previously an economic advisor to SNB).

SNB reviews monetary policies on Thursday. The report has been sent to them, but they have not yet commented, according to the authors, who are launching a public discussion on the establishment of a sovereign wealth fund.

Thomas Jordan, chairman of SNB has stated that the central bank would not use its funds for a sovereign fund because it would compromise its ability to conduct independent monetary policies.

During the outbreak of coronavirus, Jordan warned that central banks should not be used as a source of financing for state purposes.