What happened at the SNB?

At the hastily arranged press conference on January 15, SNB's president, Jordan, looked like a red-faced
school boy caught with the hand in the cookie jar. None of his explanations made any sense. The SNB
was clearly caught by surprise itself and didn't have time to make up some better lies. But why this
sudden change of heart, throwing in the towel causing book losses of somewhere around CHF 75bn
(>10% GDP)? Some theories:
a) SNB had to buy Euros by the billions every day, and the balance sheet was exploding. FX holdings, at
almost 500bn at the end of 2014 might have reached 600bn or more (almost 100% of GDP). SNB is a
listed bank with minority shareholders (like the German Theo Siegert, who holds 5.5%). So may be Swiss
regulator was getting uneasy with leverage?
b) Foreign FX is not held at the SNB, but rather at an account at a foreign bank in name of the SNB. May
be at the ECB itself. So the ECB probably knew exactly what was going on, and how many Euros the SNB
was piling up. If the number was getting out of hand, ECB could have threatened to leak some info,
inviting speculators to mount an attack on the SNB.
c) SNB had to hold the fort until after the gold referendum, since such a disaster would have
undermined trust in the SNB and possibly have tilted a few towards voting "yes".
d) After the opinion of the ECJ on bond buying it has become pretty clear the ECB will go all-in at its next
meeting and begin buying Euro-zone bonds in earnest. The SNB was running already into difficulties
finding AAA Euro-zone bonds to buy with a positive yield (to "recycle" all the Euros bought). The SNB
was forced further and further out on the maturity ladder, increasing DV01 (the risk should interest
rates start rising).
e) ECB made an offer to the SNB to take those Euro-zone bonds off the SNB's balance sheet. In
exchange, the SNB had to promise to stop buying Euros, effectively ending the peg. The ECB was never
very fond of the SNB's interventions, since the large buying of Euros probably left the Euro stronger than
it otherwise could have been, thereby working against the ECB's intentions. Letting the SNB know what
is about to happen next week (and that the SNB would have been overwhelmed by Euro printing) left
little choice. For the ECB killed two birds with one stone: it removed a large buyer of Euros, and it would
give the ECB a large chunk of bonds they otherwise would have had to buy via the market.
f) The ECB told the SNB it couldn't care less about a "Grexit" (exit of Greece from the Euro-zone). The
SNB would have to expect massive further inflows into the CHF in such a case.
g) Interestingly, an article appeared in the NZZ newspaper a few days before the cap fell ("Euro
Mindestkurs - SNB-Doyen will neue Untergrenze", NZZ am Sonntag, January 11, 2015. In the article,
Ernst Baltensperger, an "influential thinker in monetary policy", recommended giving up the 1.20 barrier
as potential losses from the SNB's balance sheet were rising. He also floated the idea of replacing the
Euro barrier with a cap versus a basket of currencies (50% Euro, 50% US Dollar).

The question remains how much of the SNB's equity is gone, and if it will be forced to resort to a rights
issue. Instead of alienating Swiss Cantons with a cash call, the government might decide it is cheaper to
buy out minorities, delist the stock and survive with an irrevocable government guarantee.
Link to an FT article I commented on: http://www.ft.com/cms/s/0/0cba3e9c-9cbd-11e4-a73000144feabdc0.html#ixzz3OvGCq0yv