Swiss National Bank
The Swiss National Bank must conduct monetary policy in the interests of the country. This is to ensure price stability, consider economic events, and create a healthy economic growth environment.
The National Bank has two head offices in Zurich, the other in Bern, and a branch in Singapore. In addition, it has six representative offices in Geneva, Lausanne, Basel, Lucerne, St. Gallen, and Lugano. 13 agencies serve the country’s money supply.
The primary responsibility of the bank is to take care of price stability. This is the most critical factor for the prosperity of the country’s economy. Inflation and deflation hurt economic activity. The leading indicator of monetary policy decisions is the medium-term inflation forecast.
The Swiss National Bank implements monetary policy by setting the SNB policy rate. The SNB also intervenes in the foreign exchange market if necessary to influence economic conditions.
The SNB also has the privilege of taking notes. It supplies the Swiss economy with banknotes. Banknotes ensure high standards in terms of safety and quality. At the same time, the bank has the right to distribute coins. The SNB manages foreign exchange reserves. The implementation of monetary policy largely determines the level of foreign exchange reserves.
The SNB analyzes the sources of risk in the financial system, identifies areas where the action is necessary. The bank facilitates the creation of a regulatory framework for the financial sector.
The SNB works with the federal government. Therefore it participates in international monetary cooperation. In addition, it cooperates with central banks. The SNB carries out foreign exchange transactions and securities. The bank monitors investments, balance sheets, and payments in Swiss accounts.
Special provisions of federal law govern the National Bank. The bank’s shares are registered on the stock exchange. Public shareholders own 55% of the share capital. 45% is mainly in the hands of individuals, and the Confederation has no stake in it.
The Swiss National Bank is independent. The National Bank and its bodies shall be instructed by the Federal Council or another body to carry out their monetary tasks.
The law provides for triple accountability to the SNB. The bank discusses monetary policy and the economic situation with the Federal Council. The SNB submits an annual written report to the Federal Assembly on the performance of the tasks. The activities of the SNB are pretty transparent to the public.
Because the National Bank performs its public function, it is subject to the supervision of the Confederacy. The Confederation does not own shares. Federal Board in connection with the administration of the SNB: appoints the majority of the members of the Board of the Bank, the Board of Directors, and their Deputies. The Swiss government will ensure the complete management of the National Bank.
Main Control Process
The Board of the Bank is responsible for overseeing the investment process and ensuring risk control. Risk Committee – consists of three members of the Board of the Bank. It manages risks and evaluates the investment process.
The Governing Council also defines the principles of investment policy. These include investment strategies, balance sheet structure, risk management strategy development. The Board of Directors sets requirements for the liquidity and security of investments. The Board makes decisions on foreign exchange assets and investment strategies. The strategy includes foreign exchange investments and strategic management.
The Internal Investment Committee determines the tactical distribution at the operational level. It regulates the allocation of currency or the amount allocated to different investment categories. Most of the assets have internal management. To avoid conflicts of interest, investment policy responsibilities are correctly organized.
Management of Bank
The most crucial element of risk management is investment diversification. Risk management is done through reference systems and limits. Risk measurement is based on standard indicators and principles.
SNB long-term investment strategies are also in the risk analysis. Analysis and internal indicators assess credit risk. Credit limits are set based on the information received. To reduce the risk, derivative replacement values are secured by securities. Risk ratios are part of all investments. Limits and guidelines go through daily monitoring.
The assets of the Swiss National Bank consist mainly of foreign currency assets. The requirements of monetary policy determine their composition. The SNB has the most significant responsibility for managing foreign exchange reserves, part of which is gold. Accounts serve to avoid potential crises and increase confidence. The implementation of monetary policy determines the level of foreign exchange reserves.
Part of the portfolio in the foreign exchange reserve includes large and medium-sized companies in the economy. SNB does not take part in the selection of capital. The bank only makes passive investments. Accordingly, the management of shares is carried out by the developed rules, determined by a set of indexes.
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