Zug, 14.01.2020

Interview with Heinz Tännler, Zug Financial Director

The Swiss National Bank will distribute more money to the cantons this year. But where will these millions go in Zug?

The Swiss National Bank (SNB) is distributing more money than usual to the cantons from the profits made in 2019. Double the normal distribution is being paid out. For the Canton of Zug, this means that an additional CHF 10 million will be received from the SNB. Finance director Heinz Tännler explains what happens to this money.

Did you expect the SNB to finish 2019 so well?
Heinz Tännler
: Yes, due to the market developments, a substantial profit, and therefore a higher distribution to the federal government and the cantons, could be expected.

The Canton of Zug will now receive a total of around CHF 20 million. What will happen to it?
The Confederation and the cantons can expect roughly twice the usual distribution. Just like the normal distribution, this additional income is not specifically earmarked, and will flow into the normal annual accounts.

Would forward-looking investments be conceivable from the higher pay-out?Is the government council (Regierungsrat) currently considering the question of how surpluses could be used in an intelligent and future-oriented manner?
The government council takes an overall viewpoint. Specifically, it will take the overall earnings situation into account when developing any sustainable and promising investment projects. Under no circumstances will it be guided by individual results, especially not by systemically unpredictable ones such as that of the National Bank.

Are there any forecasts for the next few years, or at least the coming year, with regard to SNB distributions?
The National Bank also foresees an increased distribution for 2020. For the period thereafter, it plans to conclude a new profit distribution agreement in 2021, the structure of which is currently still open.

What amount can be expected?
The National Bank is again promising a distribution for 2020 of the same size as in 2019. Further development is an open question.

Why?
One should not forget that the National Bank is not a profit-oriented commercial bank. It has a clear mandate to ensure price stability in the country's overall interest, while taking the economy into account. This mandate can result in large profits, or require interventions that can lead to heavy losses. Given the current overall geopolitical conditions, it is by no means certain where the journey is leading.

Does this windfall cause problems for the canton? Against the background of negative interest rates, for example?
As the Finance Director, I must beware of speaking of problems with additional earnings. The structural deficit of previous years, and the associated pressure to make savings, was a problem., Today, however, we face the challenge of not bursting into euphoria and high spirits in the face of the windfall. As quickly as the wind has turned positive, it can also turn in the opposite direction. The government council is therefore developing a consolidated strategy of intelligent investment. Either way, we are concerned with negative interest rates, and will take great care to keep the situation under control as far as possible through careful cash management.

In view of the higher earnings surplus in 2020 due to the SNB distribution, the call for tax cuts is likely to be loud. Will this be an issue in the government's considerations on using the windfall?
As I said, the SNB's profits and losses do not depend on traditional business activities. It would therefore be fundamentally wrong to base the financial strategy of the canton on distributions from the National Bank. I would like to emphasize once again that, based on the overall earnings situation and the future prospects, the government council will invest in projects that strengthen the Canton of Zug and make it fit for the future. That this could be combined with a tax cut cannot be ruled out. This question must be answered within the framework of a qualified overall view, however, and not by rushing things.