Big bank shares fall on Jordan’s call for more capital
ZURICH, SWITZERLAND – The Swiss franc cap of CHF1.20 to the euro will remain and the central bank will continue “to enforce it with the utmost determination”, Thomas Jordan, Swiss National Bank chairman, told a press conference Thursday 14 June. Jordan offered no real surprises, concurring largely with the federal government’s board of experts’ economic forecast, published earlier this week. He notes that the SNB expects the “global economy will only recover slowly. While the emerging economies make a major contribution to global growth, momentum in the advanced economies will remain subdued”, with Europe in particular weak due to the financial and sovereign debt crisis.
“Essentially, the SNB’s conditional inflation forecast is unchanged from its March forecast. It is based on a three-month Libor of 0.0% and continues to assume that the Swiss franc will weaken over the forecast horizon. For 2012, the forecast shows an inflation rate of –0.5%. For 2013, the SNB is expecting inflation of 0.3% and for 2014, of 0.6%. Consequently, in the foreseeable future, there is no risk of inflation in Switzerland.”
The country will see a “significant economic slowdown” for the rest of the year, offset only by an “unexpectedly strong winter half-year”, which lies behind expected growth of around 1.5% for 2012.
Share prices in Swiss banks fell Thursday morning in trading after Jordan called for the big banks to strengthen their capital bases. Credit Suisse was down 8 percent, while UBS was less affected, with a 1.8 percent fall; the two banks have been making the point in their quarterly reports that their capital base is strong.