As with any other joint-stock company, the SNB's equity capital consists of share capital and retained earnings. The share capital, which is fixed at CHF 25 million under the National Bank Act (NBA), makes up only a small part of the equity capital. The important components of the SNB's equity capital are the provisions for currency reserves, to which a certain amount is allocated each year in accordance with the NBA, and the distribution reserve, which contains profits that have not yet been distributed. The provisions basically serve to maintain the currency reserves at the level necessary for monetary policy (cf. Questions and answers on the SNB's balance sheet). In addition to this function as a general reserve, these provisions act as a buffer against all forms of risk of loss, in particular the risk of valuation losses on currency reserves. Due to the SNB's large balance sheet total, the buffer function has been to the fore in recent years. The distribution reserve is a form of profit carried forward. It serves to smooth the profit distributions to the Confederation and the cantons, and can be positive or negative.

As required by the NBA, the SNB takes into account economic developments in Switzerland when determining the amount to be allocated. The associated calculation of the percentage increase in provisions is based on the average growth of nominal GDP over the previous five years. In 2009, the SNB increased the allocation to the provisions to double the average nominal economic growth rate in view of increased balance sheet risks. In 2016, a minimum annual allocation of 8% of the provisions at the end of the previous year was introduced. This is aimed at ensuring that sufficient allocations are made to the provisions and that the balance sheet is strengthened even in periods of low nominal GDP growth. In 2020, the minimum annual allocation was raised to 10%. Based on risk considerations, the SNB can adjust the rules governing the allocation to the provisions. This minimum allocation was applied from 2016 through to 2023. The SNB's aim in this regard is to have a robust balance sheet with sufficient equity capital to ensure it can also absorb high losses in individual years.

The portion of the annual result remaining after the allocation to the provisions for currency reserves is the distributable profit (art. 30 para. 2 NBA). Together with the distribution reserve from the previous year, this makes up the net profit/net loss (art. 31 NBA). If a net profit is achieved, this is used for distributions. The NBA specifies that a dividend not exceeding 6% of the share capital is to be paid from the net profit. The decision on this matter is taken by the General Meeting of Shareholders on the basis of a Bank Council proposal (cf. Questions and answers on the SNB as a company). Any net profit remaining after the payment of a dividend is in principle available for distribution to the public sector. One-third of any such distribution accrues to the Confederation and two-thirds to the cantons. The amount of the annual profit distribution to the Confederation and the cantons is laid down in an agreement between the Federal Department of Finance (FDF) and the SNB. Given the considerable fluctuations in the SNB's earnings, the NBA stipulates that profit distribution be maintained at a steady level. Consequently, a smoothing of payments over several years is provided for in the agreement and a distribution reserve carried on the balance sheet.

Dividends are paid on condition that there is a net profit. In the 2013, 2022 and 2023 financial years, this was not the case. Therefore, the SNB did not pay a dividend for those financial years.

The SNB has a public mandate. This mandate includes the note-issuing privilege, due to which the SNB earns profits on average in the long run. Insofar as the profits are not needed for the provisions for currency reserves, it is the public sector that is entitled to the amount remaining after the payment of a dividend. Art. 99 of the Federal Constitution specifies that at least two-thirds of the distributed profit shall be allocated to the cantons. The NBA stipulates that the remaining third accrues to the Confederation.

The NBA specifies that the FDF and the SNB are to agree on the annual amount of profit distribution to the Confederation and the cantons for a specified period of time. The cantons are to be informed in advance. The profit distribution agreement for the financial years 2020 to 2025 provides for a maximum annual distribution of CHF 6 billion, if the SNB's financial situation permits. The rest of the distributable annual profit is allocated to the distribution reserve and remains available for future distributions.

Yes. The profit distribution agreement for 2020 to 2025 makes the amount of the distribution to the Confederation and the cantons contingent on the net profit. The maximum amount of CHF 6 billion will be distributed only if a net profit of at least CHF 40 billion is achieved. If the net profit is between CHF 30 billion and CHF 40 billion, a distribution of CHF 5 billion will be made; between CHF 20 billion and CHF 30 billion a distribution of CHF 4 billion; and between CHF 10 billion and CHF 20 billion a distribution of CHF 3 billion. If the net profit falls below CHF 10 billion, a maximum amount of CHF 2 billion will be distributed, whereby the distribution together with the dividend may not result in a negative distribution reserve. In the event of a net loss - as in the 2022 and 2023 financial years - no distribution is made.

For one thing, as mentioned above, given the considerable fluctuations in the SNB's earnings, the NBA stipulates that profit distribution be smoothed and maintained at a steady level. A well-stocked distribution reserve acts as a buffer, and reduces the risk of the SNB being unable to make a distribution in individual years. Furthermore, while the SNB can distribute a profit to the Confederation and the cantons, it cannot reclaim any money if it makes a loss. If the entire net profit were to be distributed every year, the SNB's equity capital would fall below the targeted level in the event of a loss.

The cantons' resident population is taken into account for the division of the funds to be distributed, with the details specified in a Federal Council ordinance. The SNB has no influence on how the distributed profits are used by the Confederation and the cantons.

Allocations to the provisions for currency reserves are made irrespective of the annual result. In the event of a loss - or an insufficiently high profit - this allocation would have a corresponding impact on the distribution reserve. This can lead to the distribution reserve becoming negative, as was the case after the 2013, 2022 and 2023 financial years.

The SNB is obliged by the Constitution to pursue a monetary policy that serves the overall interests of the country. It is not the purpose of the SNB to achieve and distribute profits. Monetary policy operations have a direct impact on the SNB's balance sheet. The primacy of monetary policy means that the length and structure of the balance sheet are subordinate to monetary policy goals (cf. Questions and answers on asset management). The major part of the SNB's assets consists of investments in gold and foreign currencies, which are stated at market value. This is why the SNB's results are largely dependent on developments in the gold, foreign exchange and capital markets, and are subject to strong fluctuations. With a longer balance sheet, the fluctuations naturally become larger in absolute terms.

Consistent fulfilment of the monetary policy mandate may, under certain circumstances, mean that the SNB has to accept the risk of substantial losses, through which its equity capital could temporarily become negative. In the balance sheet, this would be reflected by a negative distribution reserve that, in absolute figures, would exceed the provisions for currency reserves and the share capital.

No. Thanks to its ability to create money, the SNB remains solvent in domestic currency at all times. Theoretically, it has unlimited amounts of legal tender at its disposal. Therefore the SNB fully retains its freedom to act even if its equity capital temporarily becomes negative. This means it can fulfil its monetary policy mandate at all times. Moreover, there are no legal requirements that would trigger a restructuring of the SNB, let alone liquidation, in the case of negative equity capital. Nor would the SNB's shareholders be under any obligation to provide additional funding.

If a central bank's equity capital were negative over a long period of time, it could lose credibility in the markets and, in the worst case scenario, be unable to fulfil its monetary policy mandate without restriction. Therefore, in the event of a loss, the SNB's focus would then first be on building up its equity capital again. The SNB generally seeks to strengthen its equity capital in order to be able to fulfil its mandate in the long term.