SNB Says Franc Cap Stopped Being Beneficial

        ZURICH--Switzerland's central bank was forced to scrap its cap on the value of the Swiss franc because mounting costs would have been "out of all proportion" to potential benefits of maintaining the policy, the bank said in its annual report published Thursday.
        The Swiss National Bank intervened "substantially" in 2014 to defend the exchange-rate policy, which capped the value of the Swiss franc at 1.20 francs per euro, the SNB said in its report.
        Toward the end of 2014 the SNB spent 25.8 billion Swiss francs ($26.9 billion) defending the cap, the bank said in explanation of its decision to end the policy on Jan. 15. The bank said pressure on the currency continued to increase in the first half of January.
        "The costs of maintaining the [policy] of CHF1.20 per euro would have been out of all proportion to the benefits for the economy," the bank said in the report.
        The SNB shocked financial markets when it eliminated the cap earlier this year. The move sent the franc soaring against both the euro and the dollar, and pushed the Swiss stock market into a tailspin as anxiety mounted about the future of export-reliant companies.
        The SNB's policy had been designed to relieve pressure on Swiss companies, many of which are reliant on the eurozone for sales. A strong franc makes Swiss exports more expensive and reduces the franc value of repatriated earnings.
        Write to John Revill at john.revill@wsj.com
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        (END) Dow Jones Newswires

        March 26, 2015 04:10 ET (08:10 GMT)

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