Apex bank loses $51 billion

folarin okunola

July 31, 2015 12:34 PM

The bank was buying euros to maintain a minimum exchange rate of 1.20 Swiss francs to the euro.

A truck dumps five cent coins in the centre of the Federal Square in Bern, Switzerland.

Swiss central bank, the SNB, reported a first-half loss of 50.1 billion Swiss francs ($51.79 billion, £33.29 billion) on Friday.

You must be wondering how a central bank, that can actually print its own money, get hit with such a loss?

Business Insider reports that the SNB was the master of its downfall when it's foreign currency reserves suffered a huge devaluation because it abandoned a policy to cap the value of the franc against the euro earlier this year.

According to the report, the bank was buying euros to maintain a minimum exchange rate of 1.20 Swiss francs to the euro.

When the apex bank scrapped the policy on January 15, market forces took over and pushed up the value of the franc, devaluing all those euros the bank recently bought in a single stroke.

folarin okunola

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