Until the late 1990s, the Swiss National Bank had a legal requirement to maintain 40% gold backing for the Swiss franc note issue, and this precluded any active involvement in the gold market. In 1996 a report drawn up by the bank with the Swiss finance ministry suggested the gold cover should be reduced from 40% to 25% and that some of the gold thus released could be lent into the market. The bank's chairman described the 40% backing as 'a relic of the past'.

In May 1997, in response to the ongoing investigation into the activities of the Swiss banks during and after World War 2, Switzerland's President proposed to the country's Parliament that a special Foundation for Solidarity should be set up, part of whose mission would be to aid victims of the Holocaust. Capital for the Foundation would be raised by investing part of the revaluation proceeds from the sale of Swiss National Bank gold holdings, with an initial donation of 500 tonnes (16.1 million oz) being suggested.

In October 1997 an Expert Group, established to to look at revisions to the country's monetary laws, recommended that Switzerland sell 1,400 tonnes (45.0 million ounces) of its gold reserves.

In April 1999, a referendum of the Swiss people approved the formal ending of the link between gold and the Swiss franc note issue, paving the way both for lending into the market and ultimately gold sales.

During 1999, the Swiss National Bank leased nearly 150 tonnes (4.8 million oz) into the market (a figure that more than doubled the following year) and announced it would sell over the coming years 1,300 tonnes (41.8 million oz), close to 50% of its reserves. The sales began in May 2000 and a little under 392 tonnes (12.6 million oz) had been sold by the end of December 2001.

The final timetable for the sales is not yet confirmed, but it could well extend a little beyond the five years of the Washington Agreement of September 1999. This agreement limits sales by those countries in the Euro area and the European Central Bank (ECB) itself plus Sweden, Switzerland and the United Kingdom to 2,000 tonnes (64.3 million oz) between 1999 and 2004. The present rate of sales suggests that Switzerland's gold sales programme could be completed shortly after the end of the present agreement in September 2004.

Unlike the Bank of England, which held a series of gold auctions on behalf of the UK Treasury, the Swiss National Bank began selling discreetly into the market, through the Bank of International Settlements (BIS). However, since the second quarter of 2001 regular sales have been conducted directly by the Swiss National Bank itself.

Swiss National Bank
Borsenstrasse 15
8022 Zurich
Switzerland

Tel.     +41 1 631 31 11
Fax     +41 1 631 39 11
Telex  812 400 snb ch
Web    www.snb.ch

See also: Switzerland - Market Introduction