SNB’s loss unlikely to unlikely to affect the central bank's ability to conduct monetary policy

The Swiss National Bank on Friday last week announced its largest-ever loss in 2015, confirming preliminary figures released in Jan. Data showed that the SNB lost 23.3 bln francs ($23.4 bln) last year, with losses on foreign-currency holdings at 19.9 bln francs, and the value of its gold portfolio down by more than 4 bln francs.

The SNB's foreign exchange reserves, which have ballooned as a result of interventions to weaken the franc, dipped to 571 billion francs ($572 billion) in February, according to data released on the central bank's website on Monday.

Is this an indication of the SNB having intervened less on the FX market or whether this is merely due to valuation effects?The soaring CHF weakened the value of foreign-currency-denominated assets that the SNB has accumulated over the years, eroding the value of the bank's massive foreign-currency portfolio.

SNB's loss may be a symbolic blow to its credibility,reflecting changes in market valuations. A strengthening global economy will weakens the franc the SNB's foreign currency holdings should swing back to profit. That said, ECB action might cause CHF to appreciate against EUR again, which could put further pressure on the SNB.