A better explanation than mine:
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.
Much thanks for the posts. Interesting stuff.