It was a "damned if you do, damned if you don't" situation for them, really. If they maintained the peg, they would see their balance sheet expand even further while the value of their assets plummeting and be accused of causing inflation by devaluing their domestic currency (which they are supposed to protect). By abandoning the peg they have incurred huge losses on their euro-denominated assets and have caused tremendous pain to the local exporters, who are most of the Swiss industry.

The proper thing would have been not to peg in the first place and let the CHF raise gradually, driven by market forces. Also, it was utter idiocy to announce that they are abandoning the peg on a Thursday. They could have waited until market close on Friday, when most traders are out of the market and the rest have 2 days to think about their positions - then the dislocation wouldn't have been so big and the losses to the traders would have been smaller.