Learn about the Swiss National Bank History, roles and functions

Learn about the Swiss National Bank History, roles and functions

Author: Michael view: 46 Update: 14/11/2023 Downloads: 0

The Swiss National Bank (SNB) is the central bank of Switzerland. Established in 1907, the SNB is responsible for implementing the country’s monetary policy, issuing currency, protecting the value of the Swiss franc and providing payment services to banks and financial institutions. other main. In the context of a rapidly developing world, the role of the Swiss National Bank is increasingly recognized and makes an important contribution to the country’s economic development.

History and role of the Swiss National Bank

Learn about the Swiss National Bank History, roles and functions

Before the establishment of the SNB, Switzerland did not have a central bank. This leads to currency instability, with many different currencies circulating throughout the country. To solve this problem, the Swiss government passed the National Bank Act in 1907. This act established the SNB and gave it sole responsibility for the currency of Switzerland.

The SNB immediately began taking measures to stabilize the Swiss currency. The bank introduced the new Swiss franc, backed by gold and silver. The Swiss franc quickly became a strong and stable currency, contributing to the economic development of Switzerland.

In the following years, the SNB continued to play an important role in stabilizing the currency and economic growth of Switzerland. During global economic crises such as World War I and II, the SNB made the right monetary policy decisions, helping the country overcome difficulties and develop strongly afterward.

Functions of the Swiss National Bank

Learn about the Swiss National Bank History, roles and functions

Today, the SNB continues to play an important role in the Swiss economy. The bank is responsible for the country’s monetary policy, which is designed to promote economic growth and price stability. To achieve this goal, SNB has the following main functions:

1. Implement monetary policy

Monetary policy is one of the most important tools for regulating a country’s economic activity. Therefore, the SNB is responsible for implementing Swiss monetary policy. This includes managing the amount of money circulating in the economy, adjusting interest rates and monitoring the operations of commercial banks.

2. Issue currency

The SNB is the only one with the authority to issue Swiss francs. The issuance of currency is carried out based on the needs of the economy and the stability of prices. The SNB is also responsible for managing the amount of money circulating in the economy, ensuring that there is no shortage or surplus of currency.

3. Protect the value of the Swiss franc

One of the main goals of the SNB is to protect the value of the Swiss franc. This is done through maintaining stable inflation levels and monitoring factors that influence prices. If necessary, the SNB can intervene in currency markets to protect the value of the Swiss franc.

4. Provide payment services

SNB provides payment services to banks and other financial institutions domestically and internationally. This helps ensure the connectivity and stability of the Swiss financial system.

Organizational structure of the Swiss National Bank

Learn about the Swiss National Bank History, roles and functions

The Swiss National Bank is governed by a Board of Governors consisting of 7 members. The Governor is the chairman of the Council and is responsible for leading the activities of the SNB. The other members of the Council are appointed by the Swiss Government and have a term of 6 years.

The Board of Governors meets every month to assess the economic situation and make monetary policy decisions. In addition, SNB also has a three-member Executive Board, responsible for implementing the decisions of the Board of Governors and managing the bank’s daily operations.

Monetary policy decisions of the Swiss National Bank

Learn about the Swiss National Bank History, roles and functions

As mentioned above, the SNB has an important role in implementing Swiss monetary policy. To ensure the stability and development of the economy, this bank often makes the following monetary policy decisions:

1. Decision on interest rate

Interest rates are one of the most important factors affecting a country’s economic performance. The SNB has the authority to decide the base interest rate, that is, the interest rate that commercial banks must pay when borrowing money from the SNB. Adjusting the base interest rate will affect lending interest rates and savings interest rates of people and businesses.

2. Decision on monetary policy

Monetary policy is a set of measures applied to regulate the amount of money circulating in the economy. The SNB can implement soft monetary policy (promoting economic growth) or tight monetary policy (reducing inflation). Monetary policy measures include bond trading, adjusting interest rates and intervening in the foreign exchange market.

3. Decision on exchange rate

An exchange rate is the rate of exchange between the currencies of two countries. The SNB can intervene in the foreign exchange market to maintain a reasonable exchange rate for the Swiss franc. This helps protect the value of the currency and ensures the competitiveness of Swiss exports on international markets.

Monetary policy instruments of the Swiss National Bank

To carry out monetary policy decisions, the SNB uses the following tools:

1. Buy and sell bonds

Bond trading is one of the SNB’s main tools to regulate the amount of money circulating in the economy. When this bank wants to increase the amount of money in circulation, it will buy back bonds from commercial banks, creating deposits for these banks and increasing lending capacity. On the contrary, when it wants to reduce the amount of money in circulation, the SNB will sell bonds, withdraw deposits and reduce the lending capacity of banks.

2. Adjust interest rates

As one of the most important tools of monetary policy, interest rate adjustments can affect a country’s economic performance. The SNB can increase or decrease the base interest rate to stabilize the operations of commercial banks and affect lending interest rates and savings interest rates of people and businesses.

This could also affect the Swiss franc in the foreign exchange market.

3. Intervention in the foreign exchange market

The SNB can intervene in the foreign exchange market by buying and selling Swiss francs or other currencies to maintain a reasonable exchange rate for the franc. This helps protect the value of the currency and ensures the competitiveness of Swiss exports on international markets.

Financial position of the Swiss National Bank

The Swiss National Bank is one of the world’s wealthiest central banks. According to the 2019 financial report, SNB’s total assets reached more than 860 billion CHF (equivalent to about 930 billion USD). Of which, foreign exchange reserves account for more than 80% of total assets, showing the financial strength of this bank.

However, the SNB is also facing many challenges in maintaining the stability of the Swiss economy. One of the biggest challenges is pressure from other countries to value the Swiss franc as a safe currency, leading to an increase in the value of the currency and causing difficulties for Swiss export businesses. .

Vision and mission of the Swiss National Bank

The SNB’s vision is to build and maintain a stable and sustainable economy for Switzerland. To achieve this goal, the bank will continue to implement the necessary policies and measures to protect the value of the Swiss franc and maintain the stability of inflation.

The SNB’s mission is to ensure the integrity and stability of the Swiss financial system, and to play an important role in maintaining the balance between domestic and international economic factors.

Conclude

The Swiss National Bank plays an important role in maintaining the stability of the Swiss economy. With clearly defined functions and powers, the bank has been implementing monetary policy decisions and using appropriate tools to protect the value of the Swiss franc and maintain its stability. stability of inflation.

However, the SNB also faces many challenges in maintaining the stability of the Swiss economy, especially pressure from other countries. The vision and mission of this bank is to continue to ensure the connectivity and stability of the Swiss financial system and maintain the balance between domestic and international economic factors.

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