Swiss National Bank Opens Branch in Singapore
Swiss National Bank has opened a branch in Singapore, becoming the first non-Asian central bank with operations in the city-state as it seeks to better manage its portfolio of assets denominated in the region's currencies.
The move by the Swiss national bank on Thursday is a sign of the growing importance of Singapore – often dubbed "the Switzerland of Asia" – as a base for asset and wealth managers.
SNB has a portfolio of about SFr50 billion in assets denominated in four Asian currencies: the Japanese yen, Korean won and the Singapore and Australian dollars. That is about double its share of Asian currencies as a proportion of total reserves compared with 2007.
The bank has total foreign currency reserves of SFr435 billion, equivalent to more than 70 per cent of Switzerland's gross domestic product.
SNB's reserves have soared since the bank in 2011 intervened to prevent the franc strengthening beyond SFr1.2 to the euro. Last year it was forced to spend SFr188 billion to hold the minimum exchange rate in the face of "haven" inflows from investors panicking about the eurozone crisis.
Left with large holdings of euros, the bank has been diversifying its currency holdings, including into Asian currencies, with the won the latest to be added last year.
"Asian currencies have increased and we had to rethink how we managed them more efficiently," said Thomas Jordan, chairman of SNB's governing board.
"The time difference between Singapore and Switzerland is six hours. In other words, when our trading desk in Zürich starts work in the morning, they have already missed the best opportunities."
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The new office will have a staff of seven, mostly asset managers and some traders. It would "facilitate our round-the-clock operations on the foreign exchange markets in the event of the need to enforce the minimum exchange rate", Mr Jordan said.
The choice of Singapore is a coup for the city state as it seeks to bolster its position as a financial center. It is already the world's fourth-largest foreign exchange trading hub, after London, New York and Tokyo.
SNB is only the second central bank, after Indonesia's, to have a presence in Singapore.
(Read More: Singapore Punishes 20 Banks in Benchmark Rate Review)
SNB considered other locations in Asia before choosing Singapore, in part because it accounts for a significant portion of Asian trade in bonds. "This fact played a crucial role in our decision," Mr Jordan said.
Singapore is a base for about 500 institutions in the asset management industry, with total assets under management of about $1 trillion, according to the Monetary Authority of Singapore.
SNB's new office is a sign of closer ties between Switzerland and Singapore even as they are increasingly seen as global rivals in the wealth management business. Last week PwC, the consultancy, forecast that Singapore would overtake Switzerland by assets under management by 2015.
Two months ago Swiss, Switzerland's flag carrier, launched direct flights between Zürich and Singapore, in part to capitalize on growing demand for business travel between the two.