Swiss franc shock 2015: When the SNB abandoned the minimum exchange rate

The Swiss franc shock of 2015 began on 15 January 2015. On that day, the Swiss National Bank (SNB) discontinued the minimum exchange rate of CHF 1.20 per euro, with immediate effect. According to SIX, the SMI share index lost 8.67% that day, the second-largest daily loss in its history. Past performance is not a reliable indicator of future results. This article traces what the SNB decided, how it justified the decision and what the case shows about currency risk. Data as of 1 November 2026.

The minimum exchange rate from 2011 to 2015

The SNB introduced the minimum exchange rate on 6 September 2011. It remained in force for almost three and a half years. As Jordan described it, it was intended as an extraordinary and temporary measure. In August 2011, he said, the franc had been heavily overvalued by any measure, that is, far too expensive.

According to Jordan, the minimum exchange rate partly corrected the overvaluation and averted deflation. Deflation means that prices fall persistently. This is the SNB's view.

How the SNB maintained the minimum exchange rate

On 6 September 2011, the SNB declared that it would not tolerate a EUR/CHF exchange rate below 1.20. It stated that it would enforce the minimum rate with full determination and was prepared to buy foreign currency in unlimited quantities. The commitment was public and had no upper limit.

This had been preceded in August 2011 by a sharp expansion of franc liquidity. The SNB lowered the target range for the three-month Libor to 0 to 0.25%. Libor is an interest rate at which banks lend francs to one another. The target range is the band within which the SNB wanted to keep it. At the beginning of August 2011, banks' sight deposits at the SNB stood at around CHF 30 billion. The SNB raised its target for these deposits in three steps, to CHF 80 billion, CHF 120 billion and finally CHF 200 billion. According to Jordan, this had only a temporary effect on the exchange rate.

The tool: foreign currency in exchange for new francs. When the euro fell towards 1.20, the SNB bought euros. It credited the equivalent to the banks as francs in their accounts at the SNB. The central bank creates these francs itself. With every purchase, sight deposits and the SNB's balance sheet therefore grew.

Why the SNB could buy without limit. According to Thomas Jordan, the SNB can create an unlimited amount of francs thanks to its note-issuing monopoly, that is, the sole right to issue banknotes (speech of 28 November 2012). The economist Oliver Landmann writes that a central bank resisting an appreciation of its currency never runs out of ammunition, because it can produce the supply itself (ifo Schnelldienst, March 2015). The economist Alberto Martin describes the opposite case as limited: in his view, defending a currency against depreciation requires foreign exchange reserves, and the size of those reserves sets the limit (comment, April 2016).

According to SNB representatives, credibility also played a role. In February 2012, Jordan described the minimum exchange rate as having been absolutely credible for the markets ever since its introduction. Looking back, Jean-Pierre Danthine, Vice Chairman at the time, attributed its success mainly to the SNB's credibility.

In CHF billions; 2011 full year, including purchases before the minimum exchange rate was introduced. Source: SNB annual reports 2011, 2012 and 2014. For comparison, according to Jordan, total assets amounted to CHF 109 billion in June 2007.

The price. The SNB named the risks itself. Hedging the exchange rate risk would run counter to monetary policy, and valuation fluctuations could in future amount to a multiple of what had been usual (Jordan, November 2012). The annual result fluctuated sharply, with a loss of CHF 9.1 billion in 2013 and a profit of CHF 38.3 billion in 2014. On 18 December 2014, the SNB also announced a negative interest rate of −0.25% from 22 January 2015, explicitly to support the minimum exchange rate. It shifted the target range for the three-month Libor to −0.75% to 0.25%. Four weeks later, it discontinued the minimum exchange rate.

The decision of 15 January 2015

On 15 January 2015, the SNB's Governing Board decided to discontinue the minimum exchange rate with immediate effect. This ended the foreign currency purchases made to enforce it. At the same time, the SNB lowered the interest rate on sight deposits from −0.25% to −0.75%, effective 22 January 2015.

The target range for the three-month Libor was also lowered, by 0.5 percentage points to −1.25% to −0.25%. In 2015, the SNB steered its monetary policy via this range. The chart places the decisions in context.

The SNB's rationale

In its release of 15 January 2015, the SNB stated that the minimum exchange rate had been introduced as a temporary measure during a period of exceptional overvaluation. Since then, it said, the overvaluation had decreased as a whole. At the same time, it said, the monetary policies of the major currency areas had diverged more markedly, and the euro had depreciated considerably against the US dollar. The SNB concluded that enforcing the minimum exchange rate was therefore no longer justified.

In his speech of 24 April 2015, Thomas Jordan added that, with the euro remaining weak in the first half of January, the SNB could only have maintained the minimum exchange rate through permanent purchases on the foreign exchange market in rapidly growing amounts. His conclusion was that the measure was therefore no longer sustainable.

According to Jordan, holding on could have caused the foreign currency holdings and the SNB's balance sheet to grow in an uncontrolled way, possibly to a multiple of Swiss economic output. The Governing Board, he said, had judged waiting to be more costly.

Jordan explained the negative interest rate as follows: by the end of 2014, the interest rate differential between the franc and other currencies had fallen almost to zero, because interest rates abroad had fallen more sharply. This had made the franc more attractive. How the SNB assesses interest rate differentials and the franc today is explained in the article on the SNB policy rate and the interest rate differential.

The consequences in figures

SIX reports a loss of 8.67% for the SMI on 15 January 2015 and links it to the discontinuation of the minimum exchange rate.

On the economy, the Federal Statistical Office (FSO) estimated for the first time on 25 August 2016 that real gross domestic product (GDP) grew by 0.8% in 2015, after 2.0% in 2014. GDP measures the value of all goods and services produced in a year. "Real" means excluding price effects. The FSO names the discontinuation of the minimum exchange rate as one feature of the year and links it to a setback in industry. Exports of goods rose by 1.9% and exports of services by 1.6%.

In 2015, the SNB bought foreign currency worth CHF 86.1 billion, by far the largest share of it in January. Moneycab and SRF reported this on 24 March 2016, based on the SNB's annual report.

According to Jordan, the SNB remained prepared to intervene in the market after the discontinuation. He said that it would continue to be active in the foreign exchange market as necessary. He described the franc as still significantly overvalued.

Leverage and jumps

Leverage arises when someone uses little money of their own to open a much larger position, that is, a much higher investment amount, for example by posting collateral. Gains and losses then grow in the same proportion.

Loss limits are intended to contain losses. A stop order, for example, is only triggered when the price reaches a predefined level, and it is then executed at the next available price. If a price jumps without any trading in between, this price can be far below the level. How orders are executed on the exchange is explained in the article on the bid-ask spread and the order book.

What the Swiss franc shock of 2015 shows about currency risk

Anyone whose reference currency is the franc but who holds or earns euros bears the risk that the exchange rate will shift. The SMI loss of 15 January 2015 shows that a central bank decision can move markets sharply within a single day.

Risks and limitations

• Currency: Investors whose reference currency is the franc and who hold investments in euros or other currencies can lose money through exchange rate fluctuations, including suddenly. This applies unless a product is currency-hedged. Hedging has a cost and does not eliminate the risk completely.
• Leverage: Losses can exceed the amount invested. Whether a provider claims the excess depends on the contract terms.
• Loss limits: A stop order does not guarantee an execution price.
• Equities: Even a broad index such as the SMI can fall sharply in a single day.
• Interpretation: The statements on the effect of the minimum exchange rate come from the SNB. The FSO figures are a first, provisional estimate. They show proximity in time, not the size of a cause.
• Historical rules: The minimum exchange rate, the Libor target range and the exemption thresholds are rules from the years 2011 to 2015. This article is general in nature and does not constitute investment advice.

Conclusion

The Swiss franc shock of 2015 followed the SNB's decision to discontinue the minimum exchange rate of CHF 1.20 per euro on 15 January 2015. The SNB had introduced it in September 2011. It justified the step by the reduced overvaluation of the franc and by foreign currency purchases that would have had to grow rapidly. At the same time, it lowered the interest rate on sight deposits to −0.75%, and the SMI lost 8.67% that day. The numerical example shows how leverage and a price gap interact.