Graph 4 Simplified Balance Sheet of SNB as of 31th December 1998 in Billion Dollars with Gold at Market Price Assets  Liabilities  Gold Holdings & Claims on Gold Claims in Foreign Currencies Claims in Swiss Francs  24 41 17  Total  82  Monetary Base Liabilities towards the Confederation Gold Provision Capital, Reserve & Provisions  29 11 15  Total  82  27  Two arguments justify a transfer of gold reserves:  3  BIS Review 73/1999  Firstly, the existence of considerable capital resources within the SNB balance sheet shows that we are endowed with more reserve assets than necessary from a monetary point of view. There is no example of a central bank of a G10 country with such a proportion of capital and undistributed profits in its balance sheet (see graph 5). Graph 5 Estimate of G10 Central Banks’ Net Wealth in Proportion of GDP United States Germany France I taly Switzerland Netherlands Japan United Kingdom Belgium Sweden Canada 0%  5%  10%  15%  20%  The question therefore naturally arises whether the moment has not come to allocate a part of the Bank’s own wealth to other purposes than monetary policy. Secondly, our balance sheet shows clearly that any transfer of the revaluation gain or part thereof cannot take place in Swiss francs or in foreign exchange.
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proposals The group of experts has come to the conclusion that a capital corresponding to 1300 tonnes of gold could be withdrawn from the SNB’s balance sheet to be used for other purposes than monetary policy.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.