SNB Faces Cliffhanger Vote on $21 Billion in Stock Investments

(Bloomberg) -- The Swiss National Bank faces a cliffhanger national vote on its equity investments that could force it to sell defense company stocks worth about 19 billion francs ($21 billion).

Support for a proposal that would forbid the central bank from investing in companies that get more than 5% of their revenue from arms sales has declined in recent weeks and is heading toward rejection, according to a poll by gfs.bern. But the initiative still has 50% backing ahead of the Nov. 29 ballot.

Victory for the initiative would have repercussions for the SNB, as well as public and private pension funds.

With 20% of its 872 billion francs of foreign-exchange reserves in equities, the central bank fears the proposal would “significantly restrict” its investment options. It said it would have to exclude about 300 companies -- about 11% of stock holdings -- from its portfolio, and warned of legal and practical issues.

The government is also opposed, saying it would make it too difficult for funds to generate returns.

The initiative was launched by anti-war activists and is the latest in a string of assaults on the SNB’s independence. Previous ballot initiatives have -- unsuccessfully -- tried to force it to hold a fixed portion of its assets in gold and to reform the functioning of the financial system.

In addition, environmentalists want the SNB to also factor in environmental concerns into the management of its investment portfolio.

The SNB’s huge reserves come from its currency market interventions to weaken the franc. The equity investments mirror indexes, and policy makers don’t engage in stock picking.

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