It thus became fully clear  BIS Review 73/1999  2  that Switzerland was going to demonetise gold and to progressively transform a part of its stock into interest bearing assets. But why did we decide to fund the Foundation with gold and not with other assets? In order to understand this, one must take a closer look at the structure of the SNB’s balance sheet. 2. From revaluation of the gold stock to gold sales 2.1. The SNB’s balance sheet If, in relative terms, Switzerland is leading among all industrialised countries as far as gold holdings are concerned, the Swiss National Bank is also a special case with respect to the structure of its balance sheet. The bulk of the SNB’s assets consist of foreign exchange and gold. Swiss franc denominated assets constitute a mere 20% of the total. Compared to the balance sheets of the Bundesbank prior to the introduction of the euro, the SNB’s balance sheet exhibits only a small proportion of domestic assets (see graph 3). Graph 3 Assets Structure of the Bundesbank and the Swiss National Bank 20% 54% 50%  30% 30% 14% BUBA  Gold  SNB  Foreign Claims  Domestic Claims  Other Assets  On the liabilities side, the most striking feature are the bank’s own capital and reserves to which will be added the revaluation gain on the gold stock (see graph 4).
Our domestic assets are too low and a transfer of foreign reserves would have a negative impact on the Bank’s operations: • •  the SNB would be impeded in conducting its monetary operations (interventions, money market operations) the bank’s profitability and liquidity would diminish drastically. Consequently, a transfer in gold of a part of the valuation gain is the obvious solution. A group of experts has been asked to make an estimate of the excess reserve of the bank. 2.2 The proposals The group of experts has come to the conclusion that a capital corresponding to 1300 tonnes of gold could be withdrawn from the SNB’s balance sheet to be used for other purposes than monetary policy. Of these 1300 tonnes, 500 tonnes are to be set aside for financing the Swiss Foundation for Solidarity previously announced. What to do with the remaining 800 tonnes? A first idea would consist in transferring the remaining excess reserves to a public investment fund having more extensive investment possibilities than the SNB. Currently, our asset management policy is basically limited to fixed-income investments. The fund’s regulations should provide for investment in shares in order to achieve a higher long-term yield. But there is usually no limit to the imagination of politicians when money is to be distributed! Other concrete proposals exist. Some would like the excess gold reserves to be earmarked for specific goals such as improving the capitalisation of our social security schemes or for educational purposes.