SWITZERLAND – The Swiss National Bank has criticised as “dangerously populist” and “conflict-laden” a plan to use its profits to help shore up the state pension scheme.

The so-called Cosa initiative, spearheaded by the Swiss Social Democratic party (SP), is that CHF1bn (€640m) of the central bank’s CHF2.5bn in estimated annual profit would be diverted to the Old Age and Survivors' Insurance Fund (AHV/AVS).

Swiss finance minister Hans-Rudolf Merz has already dismissed the proposal as “explosive” in that it would not only would mean far less money for the government and Swiss cantons, but also would undermine the independence of the SNB.

“You already know the SNB's position on this topic: we consider this initiative to be dangerously populist, since it presents an unrealistic picture of our profit potential,” said SNB chairman Jean-Pierre Roth at its half-yearly news conference in Geneva yesterday.

“Those who launched the people’s initiative speak of an annual disposable profit of about CHF 2.5bn, while our estimates put it at around CHF1bn.

“In view of the growing financial needs facing the Old Age and Survivors' Insurance Fund (AHV/AVS) in the coming years, the gradual reduction of our distribution potential will inevitably lead to continuous tensions between political circles and the SNB.

“Even if our independence were left intact, this conflict-laden climate would be detrimental to our credibility in the markets. It is widely accepted that shielding the central bank from political pressure constitutes an important factor in the preservation of monetary stability.

“In fact, this is why there is no country whose central bank has become the direct financial source of funding of a social security scheme. Central banks everywhere deliver their profits to the government, and it is the government that allocates the funds to the different budget items.

“Moreover, establishing a direct link between the social security system and the central bank would give our fellow citizens the impression that the National Bank would be able to cover the future financial needs of the AHV/AVS without the need for further reforms.”

He said the initiative “will not bring in a single extra franc to the state coffers and – finally – it will put the functioning of our institutions at serious risk”.