The Swiss Cabinet’s office says the nationalist Swiss People’s Party has gathered enough signatures to force a referendum on banning the central bank from selling any gold reserves.
The Federal Chancellery in the capital, Bern, said Thursday that the initiative known as “Save Our Swiss Gold” had gained more than the required 100,000 signatures to force a vote among Swiss citizens within the next few years.
The party began pushing for a referendum, a mainstay of Swiss direct democracy, more than two years. It would require the Swiss National Bank to keep at least 20 percent of its assets in gold.
As of the start of 2013, just over 10 percent of the central bank’s nearly 500 billion Swiss francs ($537 billion) in assets were gold.
Swiss Central Bank Discloses 20% of Gold Reserves Held in England
The Swiss People’s Party has won enough signatures on a petition for a referendum meant to block the SNB from storing its gold in other countries, or selling it, for that matter.
The Swiss central bank doesn’t agree with the move, according to the text of Mr. Jordan’s speech.
“We share the objectives the initiators put forward, such as maintaining currency and price stability and ensuring both the SNB’s capacity to act and its independence. However, the measures proposed to this effect are not suitable; in fact, they are even counterproductive.” he said.
The referendum would force the central bank to hold at least 20 per cent of its reserves in gold, which, Mr. Jordan said, would mean the central bank would have to buy a lot of bullion to meet that target.
“It would not be allowed to sell this gold at a later point, even if it had to reduce its balance sheet again in order to maintain price stability,” Mr. Jordan said.
“In a worst-case scenario, the assets side of the SNB’s balance sheet would, over time, be largely comprised of unsellable gold”
Such a move would have “repercussions” for monetary policy, he added.
“In making its monetary policy decisions, the SNB would have to consider the long-term consequences the necessary gold purchases would have on its capacity to act and on the structure of its balance sheet,” Mr. Jordan said.
“Furthermore, market participants would hardly regard monetary policy decisions as credible, should these decisions involve a substantial expansion of the balance sheet, which in turn would impair the effect of monetary policy.”
As for storing its bullion abroad, each bar has its own identification and is “fully guaranteed at all times.”
Thomas Jordan has revealed that 70 per cent of the country’s gold was stored in Switzerland, 20 per cent with the Bank of England and 10 per cent with the Bank of Canada.
“The SNB has been storing gold exclusively in these countries for over 10 years. A number of clearly defined criteria are used when selecting countries for gold storage. First, adequate regional diversification and good market access for the storage of gold must be ensured. Second, the country in which the gold is stored must be politically and economically very stable and guarantee the immunity protection of central bank investments.”
Since the Second World War and the Cold War, several central banks in Europe have kept part of their gold reserves in foreign countries in case of invasion. But turbulence in financial markets in recent years has raised concern among Europeans, who see gold as a reliable store of value that a country can depend upon.
Mr Jordan said he disclosed details on the reserves because “there has been a growing need for transparency in our population in the last few years”.
Early this year, Germany’s central bank said it would repatriate almost 700 tonnes of gold stored in the United States and France.
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