ZURICH: The Swiss National Bank (SNB) spent 25.8 billion Swiss francs ($26.9 billion) defending its cap on the currency late last year before jettisoning the policy as too costly for the country's economy, it said on Thursday.
The SNB shocked markets in January when it removed the 1.20 per euro ceiling on the Swiss franc, sending the currency soaring, stocks plunging and sparking fears for Switzerland's export reliant economy.
The SNB has argued that it had to abandon the franc's three-year-old cap against the euro, but the decision is still reverberating, with politicians stepping up their criticism of the SNB as the economy falters in part due to the strong franc.
"The costs of maintaining the minimum exchange rate of CHF 1.20 per euro would have been out of all proportion to the benefits for the economy," the SNB said in its annual report.
The SNB conducted foreign exchange transactions and purchased foreign currency with a value of 25.8 billion francs in 2014, having made no interventions during the previous year, the central bank said.
The SNB, which said in January interventions would have cost it 100 billion francs in that month alone, said on Thursday defending the cap would have led to an "uncontrollable expansion" of the balance sheet to several times greater than the country's annual economic output.
It did not elaborate in the 218-page report on how it plans to unwind its currency reserves, which stood at 541 billion francs at year-end when calculated under the SNB's own methods, which differ from monthly reserve data reported under International Monetary Fund (IMF) standards.
"This level is high and involved both greater demands on currency reserve management as well as higher financial risk," the SNB said. Its forex reserves, measured by SNB standards, currently stand at more than 85 percent of Switzerland's gross domestic product.
The central bank said it does not rule out suspending profits to its shareholders -- mainly the Swiss government and cantons -- or lowering payout levels, echoing comments made in January.
The SNB report primarily reviews decisions and conditions from 2014 and did not make any new reference to its franc stance.
The IMF said on Monday the franc was overvalued in early 2015 and the SNB should consider easing monetary policy further to limit a slowdown in economic growth, potentially through pre-announced asset purchases.
The Swiss KOF institute expects Switzerland's economy to eke out slight growth in 2015 after dipping into a mild recession for part of the year due to the surge in the franc.
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