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The Swiss National Bank returns to Profit

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The Swiss National Bank (SNB) set a floor for the Euro - Swiss franc exchange rate early September, being up for buying foreign currencies in unlimited quantities, if needed, to weaken the Swiss franc.

It is good to hear that the SNB is above break even again, reporting an impressive net profit of CHF 5.8 billion for the 3th quarter 2011, but the same time also worth mentioning that the SNB accountants applied quarter-end exchange rates in determining the market value of the 'foreign currency investments', what is quite questionable in a situaton with self-induced artificially low exchange-rates. A real market pricing process is not in play and real foreign currency exchange rates to determine the value of the assets concerned would be substantially lower without interventions.

As a result, the 'provision for currency reserves' should eventually be much higher than the reported CHF 45 billion, what consequently would have resulted in a huge net loss.

The opinion is based on an external review of the publicly available interim financial statement as of September 30, 2011. The information base is insufficient to provide a qualified opinion and thus the conclusion may eventually be wrong.

Martin Ruchti

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