European Economic Comment "SNB: Potential modest unwinding of Q1..."

Research evidence excerpt

European Economic Comment "SNB: Potential modest unwinding of Q1..."

Background: Tracking SNB FX interventions

The SNB is fairly unique amongst developed market central banks in that it explicitly mentions FX interventions as a monetary

policy instrument, additional to the SNB policy rate. Hence, to gauge the SNB's policy action, one has to follow both rate changes

and FX interventions. The SNB publishes its actual intervention data only at quarterly frequency and with a three-month lag. Up

until 2022, weekly sight deposit data were a more real-time data source for tracking FX interventions. However, they have become

distorted by the SNB's liquidity-absorbing open market operations and are not reliable anymore (Figure 4Decompositionofthechangeinsightdeposits,CHFbn). We therefore estimate

FX interventions from monthly balance sheet data. We have two estimation methods: 1) through the liability side via adjusted

sight deposits (adjusting the change in total sight deposits and liabilities to government for the change in banknotes, the change

in secured loans, the change in open market operations, the approximated interest remuneration payments, and any profit

distribution); and 2) through the asset side via valuation-adjusted FX reserves (subtracting the change in FX liabilities, change in

provisions & equity capital and any profit distribution from the change in FX reserves and gold). Both approaches track the actual

FX interventions reasonably well, with a correlation coefficient of 0.89 (Figure 2QuarterlyFXinterventionestimatesvsactual,CHFbn). See our note SNB: FX interventions and the

balance sheet for details.

Figure 1: Monthly FX intervention estimates, CHF bn Figure 2: Quarterly FX intervention estimates vs actual,

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