Swiss central bank to post lower profits

The Swiss National Bank (SNB) says it expects to post a profit of about six billion francs ($6.4 billion) for 2012 — less than half of what it made in 2011.

In 2011, Switzerland's central bank posted a profit of 13.5 billion francs.

Last year, foreign currency positions added around 4.7 billion francs to the bank's profit, the SNB said in a statement on Thursday, without providing further details.

The bank, which is set to release its complete results on March 7th, meanwhile said that 3.6 billion Swiss francs of its profit would go towards
"provisions for currency reserves."

SNB has worked hard to prevent the franc from gaining too much in value against the European common currency, as investors, unsettled by the eurozone debt crisis and uncertain US economic prospects, have fled to the perceived Swiss safe haven.
The central bank has repeatedly vowed to maintain an exchange rate floor of 1.20 francs for each euro to avoid the Swiss currency taking flight to the detriment of the country's exporters.
The SNB also said on Thursday that rising gold prices boosted the value of its holdings of the precious metal by 1.4 billion francs.

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Why is the demand for 1,000-franc banknotes growing in Switzerland?

Large-denomination banknotes, like the 1,000-franc note, are rarely used for everyday transactions in Switzerland. So why are they becoming more popular?

Why is the demand for 1,000-franc banknotes growing in Switzerland?
The kind of banknotes the Swiss like to stash away. Photo by AFP

The demand for 1,000-franc notes has risen in the past months, data from the Swiss National Bank (SNB) indicates.

CHF1,000 converts to approximately €925.75, £824,63 or $US1126.98. 

Whether withdrawing the money from an ATM machine or directly from a bank, customers request large-bill denominations more often than before.

“We do know there is more cash being currently withdrawn in large notes, but it changes hands less often” Sarah Lein, a monetary policy expert from the University of Basel told SRF public broadcaster.

This means the money is not being spent but stashed away.

“We can conclude that some large notes end up in a safe”, she added.

READ MORE: Switzerland’s economy forecast to recover 'from summer onwards' 

The reason, she said, is that many banks charge their customers negative interests on large deposits.

“Therefore, it could be cheaper to simply withdraw the cash in large notes and keep it in a safe, especially since inflation has been extremely low for a long time”, Lein added.

This is not unusual — in times of crisis, more cash is often in demand.

But could this cause the shortage of 1,000-franc bills?

That is not likely to happen, Lein pointed out.

“Both the central and commercial banks have enough cash stored in their vaults to meet such demand. So there is always enough money available”, she said.

There is about 48.6 billion francs floating around in the form of 1,000-franc notes, constituting 59 percent of all Swiss notes in circulation. 

It is the world’s second-largest denomination after Brunei's B$10,000 note.

READ MORE: What do people in Switzerland spend their money on?