SNB Removes EUR/CHF Floor, Franc Soars

Surprising markets, the SNB ended the floor it had defended since 2011. EUR/CHF collapsed from 1.20 toward 0.85 intraday before retracing above parity. Liquidity vanished as dealers widened or withdrew quotes, and several retail brokers reported losses. Swiss equities fell on the earnings hit from a stronger franc. The SNB also cut rates deeper into negative territory, underscoring the move as a regime shift rather than a tweak.

The episode exposed hidden leverage and model risk. Stop-loss cascades met thin markets, amplifying gaps. Structured products linked to the floor repriced painfully, and funding lines were tested for margin sufficiency. We revisited assumptions around central bank commitments when confronted with balance-sheet and legal constraints. Policy can pivot abruptly when cost-benefit shifts, a reality that compels humility in sizing and hedging around lines in the sand.

We moved quickly in client portfolios. We closed CHF short overlays and neutralized basis risk in euro assets hedged back to francs. We raised cash and reviewed managers with FX carry or volatility-selling mandates, demanding evidence of robust gap controls. For Swiss exposures we emphasized exporters with natural hedges and global cost bases. We also re-priced return expectations for Swiss assets under a structurally stronger currency.

Going forward, we embedded stress scenarios for peg breaks across our risk systems. We diversified hedging instruments, preferring listed options and cleared venues where possible to manage counterparty concentrations. Policy unpredictability reinforced our preference for liquid, transparent exposures in core allocations. The broader lesson was simple: avoid attachment to policy floors; position for resilience when they fail.