Despite the prevalence of the Euro in Western Europe, the Swiss Franc remains the dominant currency of Switzerland. The Swiss Franc is unrelated to the uncirculated French currency of the same name, but it is the official currency in Switzerland and Liechtenstein, as well as Campione d’Italia. Regulated by the Swiss National Bank (SNB), the currency is typically denoted by the abbreviation SFr. or Fr., and is sometimes referred to as the “Swissie.”
The official currency code is CHF, and the banknotes currently in circulation are for values of 10 SFr., 20, 50, 100, 200 and 1000. The notes vary in colour, design and even size (the higher the value, the larger the note), and feature images of famous artisans and cultural contributors from Swiss history, including the likes of architect Le Corbusier and sculptor Alberto Giacometti.1)Retrieved 9 September 2015 http://www.snb.ch/en/iabout/cash/current/design/id/cash_current_design_10
The History of the Swiss Franc
Prior to 1850, the state of economics and currency in Switzerland can be best described as disorganised. Following French occupation of Switzerland (during which the country was briefly known as the Helvetic Republic) during the French Revolution, years of political turmoil were defined economically by a lack of cohesion. The various cantons within Switzerland, both before and after the country regained independence in 1815, minted their own coins and developed their own currency systems, with no regulation or order on a national scale.
In 1848, the Swiss Federal Constitution was passed as a response to Civil Wars and power struggles throughout the 1840s. A portion of the constitution addressed the need for a nationalised currency system, specifically by officially giving the right to mint currency to the federal government. This set the plan for a national currency in motion, and on May 7, 1950 the Federal Coinage Act was passed as a follow-up and established the Swiss Franc, which was based on a uniform silver standard.2)Retrieved 9 September 2015 http://www.swissmint.ch/en-topics-numismatics-the160yearsofswissfranc.the-160-years-of-swiss-franc.html
In the years immediately following the Act, Swiss currency remained somewhat varied, as national mints were not yet able to produce high quantities of coinage and foreign currencies still held significant sway. By 1890, a mint formerly belonging solely to the Canton of Bern was absorbed by the federal government to become the first Federal Mint of Switzerland.
The silver standard evolved as the minting process became more uniform and gold coins were also introduced to the Swiss economy, as well as those of neighboring countries. The next major hurdles came in the mid-1900s. The first arrived when the Great Depression caused the metal value of gold to exceed that of the coins it was used to make. Then, the same issue came up with silver values in the ‘60s. As a result of these developments, gold and silver were taken out of circulation, respectively, with gold coins absorbed as Swiss National Bank reserves and silver melted down. In 1968, the Swiss Federal Council declared the use of a copper and nickel alloy for all future minting of coins in the 1.5-to-5 SFr. value range.
In 1998, the federal mint was renamed “Swissmint” and took on functionality as a manufacturer largely of consumer goods such as commemorative coins and collection sets. This transition did not signal that coins have become obsolete in Switzerland, but it does reflect the fact that throughout the 1900s, paper currency largely took over.
Now, though coins are slowly being relegated to the fascinating economic history of Switzerland, the Swiss Franc is arguably as stable and regulated as it has been at any point in the country’s history. However, recent political movements within the country have raised the possibility of a return to a partial gold standard, which would drastically change the ways in which the SNB regulates the Swiss Franc.3)Retrieved 9 September 2015 http://www.usnews.com/opinion/blogs/pat-garofalo/2014/11/28/switzerlands-dangerous-gold-standard-flirtation
An Early Model for the Modern Euro
Hidden within the history of the development of modern Swiss currency is a brief chapter that stands clearly as an early model for the modern Euro. As noted previously, the period surrounding the turn of the 20th century saw increased regulation of currency minting throughout Switzerland and the regions around it. Specifically, this was thanks to the establishment of the Latin Monetary Union in 1865.4)Retrieved 9 September 2015 http://www.sciencedirect.com/science/article/pii/S1879933711000029
Organised by France, Belgium Italy, and Switzerland, this Union was designed to standardise the production of coinage (in terms of actual material dimension and exchange rate) and limit monetary production on a per capita basis. Additionally, it was established that currency adhering to these standards could be used within any of the nations involved in the Union. While Switzerland is not actually a member of the modern eurozone, it’s clear that the Latin Monetary Union was an early example of a desire that still exists today among many European officials to unite the continent monetarily.
In Switzerland today, the Swiss National Bank is responsible for determining and orchestrating monetary policy. Primarily, this means that the SNB seeks to maintain price stability, specifically by guarding against inflation or deflation over the long-term. The overarching goal of Swiss monetary policy is for the SNB to determine an accurate forecast for coming inflation and thus adjust interest rates and currency value accordingly to reach price stability.5)Retrieved 9 September 2015 http://www.snb.ch/en/iabout/monpol
Economy of Switzerland
By one measure that took into account rule of law, regulatory efficiency, government spending and fiscal and market freedom for citizens, Switzerland was named the world’s fifth freest economy of 2015.6)Retrieved 9 September 2015 http://www.heritage.org/index/country/switzerland The same report cited Switzerland’s focus on monetary stability, low debt and strong employment numbers as reasons for general economic prosperity; the country’s unemployment rate is under 4.5% for a population that exceeds 8 million. Switzerland has a GDP of roughly US$688 billion in circulation, placing it among the top-20 biggest economies in the world.7)Retrieved 9 September 2015 http://knoema.com/nwnfkne/world-gdp-ranking-2015-data-and-charts
Key components within the Swiss economy include its highly specialised service sector, specifically financial services and the development of new technologies and advanced products.8)Retrieved 10 September 2015 http://www.eubusiness.com/europe/switzerland/home/econ Switzerland is not a major exporter of native resources, but its exports do typically exceed imports due to the country’s propensity for reselling imported goods at a profit. The most common imports are in machinery, chemicals, metals, agricultural products and textiles, and the nation’s principal trade partners include Italy, France, Germany and the United States.9)Retrieved 10 September 2015 http://www.economywatch.com/world_economy/switzerland/export-import.html The few popular Swiss exported goods that originate there include chocolates and watches.
The aforementioned “free” nature of the Swiss economy invites free trade practices for both domestic and foreign citizens. In order to protect the integrity of the Swiss financial market, the country passed a law titled the Federal Act on Stock Exchange and Securities Trading in February 1997.10)Retrieved 10 September 2015 http://www.six-swiss-exchange.com/participants/regulation/framework_en.html This act created a legal system for the regulation of securities trade and exchange within the conditions of the European Free Trade Association, of which Switzerland is a member. As such, regulation of Swiss stock and commodity exchanges is conducted by the federal government.
Major Swiss Franc Currency Pairs
The most significant currency pair involving Switzerland is USD/CHF, in which the Swiss Franc is measured against the USD. This is the only pair among the handful of those that comprise the “Majors” that involves Switzerland. The Majors are the most frequently traded and therefore most liquid pairs on the market. Other significant currency pairs involving Switzerland include EUR/CHF, GBP/CHF, and CHF/JPY, measuring the Swiss Franc against the Euro, the British Pound and the Japanese Yen, respectively.
Swiss Bills and Coins
As stated, there are six different banknotes in circulation in the Swiss economy, worth 10, 20, 50, 100, 200 and 1000 Swiss Francs, respectively. Each type of note has a unique size, colour and design, and pays homage to a particular historical figure of national cultural importance. Orell Fussli Security Printing Ltd., the company entrusted by the government to print official banknotes, adheres to three main policies when producing currency: fulfilling security requirements meant to trick forgers, which includes altering designs during a note’s time in circulation; instilling durability and differentiation to make the notes easy to handle and distinguish in everyday use; and meeting aesthetic demands and expectations.11)Retrieved 10 September 2015 http://www.ofs.ch/en/did-you-know/swiss-banknotes/
In addition to producing commemorative coin collections for tourists and collectors, Swissmint still produces modern, functional currency. The seven types of coins in circulation today are worth 5, 2 and 1 Swiss Francs, in addition to 50, 20, 10 and 5 centimes (which are 1/100 of a Swiss Franc in value, similar to the cent in the U.S.).12)Retrieved 10 September 2015 http://www.snb.ch/en/iabout/cash/id/qas_muenzen#t3
Swiss Franc Around The World
Thanks in large part to the prevalence of the Euro in Western Europe, the Swiss Franc is not used as official currency or legal tender in many regions beyond its own boundaries. Similarly, the Swiss Franc is not used as a pegged currency by any nations.
- Campione d’Italia (exclave)
References [ + ]