Swiss National Bank says spent $27 billion to defend franc before dropping peg

SNB shocked markets in Jan when it removed 1.20 per euro cap on the Swiss franc

The Swiss National Bank (SNB) spent 25.8 billion Swiss francs ($26.91 billion) defending the currency late last year before abandoning its peg as too costly for the country's economy, it said on Thursday.

The SNB shocked markets in January when it removed the 1.20 per euro cap on the Swiss franc, sending the currency soaring, stocks plunging and sparking fears for Switzerland's export reliant economy.

The SNB has argued that it had to abandon the franc's three-year-old cap against the euro, but the decision is still reverberating, with politicians stepping up their criticism of the SNB as the economy falters in part due to the strong franc.

"The costs of maintaining the minimum exchange rate of CHF 1.20 per euro would have been out of all proportion to the benefits for the economy," the SNB said in its annual report.

Toward the end of the year, the SNB conducted foreign exchange transactions and purchased foreign currency with a value of 25.8 billion francs, the central bank said.

The SNB, which has in the past said interventions would have cost it 100 billion francs in January alone, said on Thursday that defending the peg would have led to an "uncontrollable expansion" of the balance sheet to several times greater than the country's annual economic output.

The SNB report primarily reviews decisions and conditions from 2014 and did not make any new reference to whether it currently viewed the franc as overvalued, as it did at its most recent policy meeting last week.

The International Monetary Fund (IMF) said on Monday that the franc was overvalued in early 2015 and that the SNB should consider easing monetary policy further to limit a slowdown in economic growth, potentially through pre-announced asset purchases.

($1 = 0.9586 Swiss francs)