Graffiti Just the Beginning for SNB as Swiss Activists Pounce

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(Bloomberg) -- First it was an octogenarian graffiti artist. Now it’s a group of environmentalists.

Switzerland’s central bank has come through plenty of battles about currency ceilings, negative interest rates and market interventions in recent years. But its latest challenges are more novel, with a motley group of political activists pushing proposals on everything from ethical investing to removing one of the cornerstones of the financial system.

On Thursday, the Swiss National Bank will be presented with a letter in Zurich urging it to stop holding shares of fossil-fuel producers, days after an 86-year-old woman scrawled a slogan at its office in Bern to protest its investments in weapons firms. On top of that, its annual meeting next week will feature a least one speaker backing the Vollgeld initiative, which seeks to end the way banking has been conducted for centuries.

It’s not the first time that the SNB has come into the crosshairs of political campaigners. It saw off an unsuccessful bid in 2014 to force it to hold a fixed portion of its assets in gold and repeatedly has faced criticism for the ballooning of its balance sheet due to interventions.

While other central banks have also been targets -- anti-austerity protests marred the opening of the European Central Bank’s new headquarters and a confetti-throwing activist disrupted a press conference in 2015 -- Switzerland’s system of direct democracy means the SNB is in something of a unique position.

“If you look at the foreign-exchange interventions and its swollen balance sheet, the SNB is permanently more in the public eye,” said Alexander Koch, an economist at Raiffeisen Schweiz in Zurich and a shareholder in the central bank. “There seem to be more people thinking about how they could step in.”

Christian Luethi of Klima-Allianz Schweiz, one of the organizations behind the letter on fossil fuels, says his group has a permit for a peaceful demonstration in Bern on the day of the AGM.

Another group backing the environmental letter has submitted a proposal for the AGM to ultimately ban SNB holdings in companies that harm the environment, violate human rights and produce internationally condemned weapons. The motion won’t be taken up at the April 28 meeting, according to the agenda.

“I can’t think of anything on a similar scale on the euro zone or in the U.K.,” said Jessica Hinds, an economist at Capital Economics in London.

While Switzerland’s use of plebiscites to amend its constitution, along with the SNB’s annual payout to the cantons, may make the central bank more sensitive, Hinds said it’s probably “very marginal.”

Twenty percent of the central bank’s foreign-exchange reserves are in equities, using a strategy mirroring broad-based indexes, though it excludes some companies on ethical grounds and banks to avoid possible conflicts of interest.

The campaign for a national ballot on the defense investments -- kicked off with the graffiti protest last week -- is only starting to collect the requisite 100,000 signatures, and a vote isn’t likely for a few years.

Before that -- potentially in 2018 -- there will be a plebiscite on the Vollgeld measure, which would effectively end fractional reserve banking by forbidding commercial banks from granting loans that aren’t fully backed by deposits.

Proponents already spoke at the 2016 AGM, helping to stretch it out past noon and delaying the free lunch and ice cream popular among attendees. The majority of the SNB’s shares are held by cantons and cantonal banks and there are also some 2,000 private investors, who receive a dividend but whose voting rights are extremely limited. 

According to spokesman Raffael Wuethrich, Vollgeld representatives intend to make a showing again at next week’s meeting.

“We will step up to the lectern,” he said.

To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net.

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Zoe Schneeweiss, Brian Swint

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