Legal Basis monetary policy

The Federal Act on Currency and Payment Instruments (CPIA) stipulates that the Swiss franc is Switzerland's legal tender (currency). Legal tender comprises banknotes, coins and sight deposits at the Swiss National Bank (SNB). Banknotes can be used for payment without restriction, whereas payments in coins are limited to 100 coins per payment. The SNB issues banknotes, while Swissmint, a unit of the Federal Finance Administration, is responsible for minting coins.

The Federal Act on Currency and Payment Instruments (CPIA) stipulates that Switzerland's currency is the Swiss franc. Under the Act, legal tender – i.e. payment instruments by which monetary debts may be settled with legal effect – comprises banknotes, coins and sight deposits at the Swiss National Bank. For historical reasons, they are issued by two different institutions: The Swiss National Bank issues banknotes, while Swissmint – an autonomous unit of the Federal Finance Administration – strikes coins. It then delivers the coins to the SNB, which circulates them according to the needs of the economy. The SNB also determines the face value and design of the banknotes. It chooses the denominations so that the economy is optimally supplied with printed money. When designing banknotes, security from counterfeiting plays an important role.

While banknotes and sight deposits at the SNB are of unlimited legal validity, i.e. as many of them as desired may be used to settle debts and must be accepted as payment, the legal validity of circulation coins is limited to 100 coins. Anniversary and commemorative coins are not considered legal tender and may therefore be refused. Privately issued payment instruments – such as cheques, guarantee and payment cards, bank and postal accounts, and electronic money – are likewise not considered legal tender. They are therefore not governed by the CPIA.

Currency

Switzerland's currency policy is the responsibility of the Swiss National Bank and the Federal Department of Finance. It is designed to be flexible, so that it can react to the domestic and external stability situation.

Monetary policy is the responsibility of the SNB. The FDF deals with questions concerning the SNB's governance and legal basis. Monetary and central banking legislation falls within the remit of the FDF and is established in procedures that involve the FDF and the SNB.

Unlike foreign monetary orders, neither the Federal Constitution (Article 99 of the Cst.) nor the Federal Act on Currency and Payment Instruments contains provisions for a national monetary system in Switzerland. This reflects the openness of the legislative power to the two different basic options of monetary policy: the central bank may either aim to achieve domestic value stability – understood as price stability – via control of monetary variables, or it may aim to achieve external value stability by keeping the value of the franc constant in relation to another currency or a basket of currencies through foreign exchange transactions. For pragmatic reasons, the law leaves the procedures and responsibilities for determining the external value of the Swiss franc open.

Since the transition to floating exchange rates (1973), the exchange rate of the Swiss franc has been determined by market forces. An important influencing factor is certainly the monetary policy of the SNB, whose goal according to the National Bank Act is to ensure price stability (domestic value stability). Since the external value of the Swiss franc is of great importance to the course of the economy – and hence to the path of inflation – the SNB takes it into consideration when making its monetary policy decisions.