Four times a year, the Swiss National Bank summons the press to explain its vision of the world and events. The quarterly ritual of this “examination of the economic and monetary situation” has something immutable, which is summed up very well by the following sentence: “The National Bank is continuing its expansionary monetary policy.”
The negative interest remains what it is, interventions on the foreign exchange market take place whenever necessary, and the rate of the franc, although high, is kept above a bar, slightly fluctuating but never lower than 1.05 francs for one euro, so that “appropriate monetary conditions” are ensured. In short, in the Land of the Morning calm one would like to say, of Switzerland as of Korea. Or again: monetary policy in autopilot mode.
“We rushed to the gate to get loans”
Except that it happens, in exceptional circumstances generally coming from elsewhere, that the SNB takes back orders to strike a big blow. This was, in October 2008, the almost incredible rescue of UBS, masterfully carried out in coordination with the services of the Confederation. It had been previously, in 1973, the sudden putting of the franc in floating after the abandonment by the United States of the convertibility in gold of the dollar. It was much more recently, in 2011, the provisional introduction of a floor against the euro, reminiscent in a way of the attempts to stabilize the exchange rate carried out without much success in 1978.
And it is, since last May, the activation of a “BNS-Covid-19 refinancing facility”, or FRC, which makes available to banks, in principle temporarily but for as long as necessary , unlimited liquidity to finance almost risk-free, given the public guarantees announced, loans to small and medium-sized businesses hit by the net cessation of all activities due to the pandemic.
These successive deviations from monetary orthodoxy, never seen before in the memory of a central banker, have not made Switzerland a hanging case in the eyes of the international community and singularly American, yet ticklish, the latter in terms of tampering foreign exchange rates.
The European Central Bank has gone much further in experimenting with new practices (quantitative easing, repurchases by hundreds of billions of public and even private bonds) and, always ready to react, the American Federal Reserve continues at this moment to be hyperactive in the granting of credit facilities of all kinds, including to companies and even to households.
Speed of reaction
Nevertheless, the SNB, a monetary authority often accused of sluggishness, even inertia compared to the others, has once again provided proof that it is capable of reacting quickly, with of course the approval of the Council when it comes to preventing the worst.
We rushed to the gate to get loans, as the pandemic shock was severe. By the end of May, more than 16 billion francs had been channeled to the benefit of tens of thousands of SMEs. It could therefore be that, thanks to this mechanism, more companies than we thought manage to hold out, and that the recovery, which we feared was slow to appear, will end up looking more like a V than U dreaded. On the condition, of course, that external demand, on which Switzerland depends so much, will recover without delay.