Paul Richli will prepare report on SNB governance reform needs
BERN, SWITZERLAND – The Swiss government is beginning a review of the possible need to reform governance of the Swiss National Bank. The cabinet Wednesday 25 January announced that it has asked Professor Paul Richli to draw up an external expert report that outlines “the tasks and responsibilities currently regulated in the National Bank legislation in connection with supervision of the SNB”. He will also look at the “constitutional room for manoeuvre in terms of possible amendments”, says the Federal Council.
Two federal offices, Justice and Finance Administration, have also been instructed “to submit a proposal for an additional mandate to examine corporate governance within the SNB more closely.”
An interdepartmental working group led by the Federal Office of Personnel has been asked to draw up recommendations for a uniform set of rules if necessary after examining”the existing code of conduct on the abuse of insider information in the Federal Administration”.
The moves come in the wake of the resignation of Philipp Hildebrand as chairman of the Swiss National Bank after a scandal involving family assets. Hildebrand was found innocent of wrongdoing, but the affair prompted widespread calls in Switzerland for a review of the regulations governing board members.
Richli is the rector of the University of Lucerne and he has held, since 2001, the chair of the department of public aw, agricultural law, and theory of drafting legislation at the Faculty of Law of the University of Lucerne.
ZURICH, SWITZERLAND – The head of the Swiss National Bank may have been pushed to resign by the governing board of the bank, Swiss media, particularly in German-speaking Switzerland, are suggesting Tuesday. Philipp Hildebrand handed in his resignation Monday afternoon, after a two-week scandal sparked by information about his wife’s purchase of dollars in August and profit from their sale two months later.
TSR carries a roundup in French of what several media are reporting today, noting that conservative Christoph Blocher, former head of the UDC People’s Party appears, for now, to be the winner in the political brouhaha surrounding the scandal.
Questions remain about whether or not Hildebrand will take legal action against anyone in the case, which involved private bank data being published by Swiss magazine Weltwoche, and what role Blocher played.
Background stories, GenevaLunch
Reuters profile of Hildebrand and his tenure, 10 January
SNB “regrets” his decision and circumstances leading to it – CHF1.20/euro cap remains
Philipp Hildebrand, press conference after he resigned as Swiss central bank chairman
BERN, SWITZERLAND – Philipp Hildebrand, who resigned early Monday afternoon as chairman of the Swiss National Bank, says the decision was his own because “I have concluded that I might not, for some time, be in a position to make the kind of tough decisions and implement them as in the past.”
Hildebrand has been at the centre of a political and media storm for several days over currency transactions that brought his wife CHF60,000 in profit in the second half of 2011. He said at a Monday afternoon press conference called on short notice that “The fact is, my word is my bond. I had no knowledge of my wife’s action. I deeply regret these mistakes as well as the entire situation. . . I have concluded that I might not, for some time, be in a position to make the kind of tough decisions and implement them as in the past.”
He added: “Hopefully I emerge wiser strong and a more experienced banker than I was a few weeks ago.”
The SNB governing board announced that it “regretted” his departure and noted that his decision to leave will not change the CHF1.20 to the euro cap that Hildebrand put in place.
Currency markets reacted to the news with the Swiss franc taking a brief nosedive before Hildebrand’s press conference before the franc closed slightly lower against the euro at CHF1.21 and the dollar, at CHF0.9593.
Hildebrand, who appeared composed and at ease, replied in answer to a question that he had spent hours going over every bit of correspondence, e-mails, phone calls and messages, trying to find something that would refute once and for all, accusations that he might have had advance knowledge of his wife’s action, but he had not been able to come up with that irrefutable piece of evidence.
The credibility of the SNB is its greatest strength, he said, and he wants to ensure that this remains intact, noting that the SNB has contributed significantly to maintaining stability in a world which has recently suffered a number of political and financial crises, notably linked to sovereign debt problems.
“I give my word again: I never lied, things happened as I say they did. But I can’t prove it” absolutely.
Thomas Jordan, vice-chairman, will step into the role of chairman until the SNB appoints a new one.
The Bank Council issued a release noting that “With him, Switzerland is losing an outstanding central banker with excellent international connections, which have brought great benefit to our country.
“Based on the events and findings of the past few days, Philipp Hildebrand has now decided to resign his post. The Bank Council accepts this decision, which Philipp Hildebrand has made in order to protect the institution.
The Bank Council would like to thank Philipp Hildebrand for his outstanding achievements in the field of monetary policy, and for his enormous dedication in the service of both the SNB and Switzerland. Philipp Hildebrand, together with his colleagues in the Governing Board, successfully steered the SNB through a period of exceptional monetary policy challenges. At all times, his endeavour and his goal was the optimal fulfilment of the SNB’s mandate.”
IT whistleblower says lawyer took advantage of him
Philipp Hildebrand, former chairman of the Swiss central bank
ZURICH, SWITZERLAND – Swiss central bank chairman Philipp Hildebrand, age 48, has just resigned, effective immediately, but the scandal over the theft of private bank data and the financial transactions of Hildebrand’s wife is not likely to die down quickly.
He had worked for the bank since 2003 and was named the youngest ever chairman in January 2010.
Hildebrand said at a press conference last Thursday, 5 January, that he would remain in office as long as he had the support of the Swiss Federal Council, the cabinet. He called for reform in the wake of the scandal, including greater transparency on the part of central bank governors about their own financial transactions. Full text of HIldebrand press conference presentation (pdf)
He denied wrongdoing, saying that the CHF60,000 profit on currency transactions from August to October 2011 was his wife’s responsibility; a Bank Council investigation as well as one done by PricewaterhouseCooper’s support his claim. Hildebrand’s wife is a former currency trader who now owns a Zurich art gallery and the transactions were reportedly on behalf of her business.
But observers including a number of politicians have said in the past week that even if the central banker respected the letter of the law, and even if the law needs to be changed, he acted irresponsibly. Bloomberg/Business Week quotes Peter Kunz, head of business law at the University of Bern, as saying it’s “absolutely incomprehensible” that the relatives aren’t included in the regulations. “‘From a legal point of view, Ms Hildebrand’s dollar trade isn’t problematic,’ he said. “From the point of view of morality, experienced economic experts like the Hildebrands should know that a spouse’s trades are not without problems.’”
Kashya Hildebrand’s purchase of $500,000 in August, and sale of them in October, came during a period when the Swiss franc continued to climb against the dollar and the euro. Her husband had responsibility for Swiss monetary policy and capped the over-valued franc.
The banker is scheduled to issue a statement and copies of documents at 15:15 Monday, shortly after announcing his resignation. He was earlier scheduled to appear before parliament Monday afternoon to answer questions and share documents. Parliament still has a press conference scheduled for 18:00.
The unfolding story over the weekend centred, not around Hildebrand, but the man who stole the data, who contacted three Swiss media to say he has been abused.
UDC, lawyer and IT employer tell different tales
The 39-year-old IT worker says he turned to a lawyer with the information about Hildebrand’s accounts, not because he wanted to be a whistleblower or to have the information widely published, but because he wanted to understand the significance of the information he had viewed.
The man, who lost his job at Bank Sarasin after turning himself into police, copied data from the private accounts of Hildebrand and shared it with an old childhood friend, now a lawyer and cantonal politician in Thurgau, Hermann Lei. The man who is being investigated for taking the information has been hospitalized and is under surveillance in a psychiatric unit for fear he will try to commit suicide.
But the details of what happened differ depending on the source: the IT worker and Lei, through his lawyer, both say they met with Christoph Blocher, former head of the rightwing UDC People’s Party, who has had an abrasive relationship with Hildebrand. Blocher has remained silent on the affair, but the UDC denies such a meeting ever took place.
The IT employee says he did not give Lei permission to turn the material over to Weltwoche, a Swiss political weekly magazine that published details a week ago, information that Lei’s lawyer denies.
SNB rules tightened Saturday, but parliament wanted more answers
The Bank Council, which oversees the Swiss National Bank, announced after an extraordinary meeting Saturday that it was tightening rules to include family members of the governing board and to reduce to CHF20,000, effective immediately, the amount of foreign currency board members can trade without advance clearing.
See also: GenevaLunch background stories on Hildebrand and the SNB
Bank Council says “taking measures is in order”: tighter rules immediately for board members and greater future transparency
Swiss National Bank vice-chairman Thomas Jordan, chairman Philipp Hildebrand and member of the Enlarged Board, Jean-Pierre Danthine
ZURICH, SWITZERLAND – The supervisory body for the Swiss National Bank (SNB) announced after a special meeting Saturday 7 January that it is tightening measures governing board members’ personal financial transactions, effective immediately, hiring an outside body to carry out a review with an eye to longer term measures. The Bank Council has also “decided that all bank transactions effected by members of the Enlarged Governing Board between 1 January 2009 and 31 December 2011 will be reviewed by external auditors (preferably KPMG or Ernst & Young).”
The extraordinary measures follow several days of headlines where SNB Chairman Philipp Hildebrand’s family’s foreign exchange transactions in late 2011 came under close scrutiny from Swiss but also foreign media and political parties, culminating in a press conference Thursday with Hildebrand recapping events and taking questions from dozens of journalists.
At issue: Hildebrand’s wife, an experienced foreign exchange trader who now runs a Zurich art gallery, bought and sold dollars and made a sizeable profit in October 2011, close to the time when her husband was capping the Swiss franc/euro rate, and questions were raised about whether Hildebrand personally benefited from inside information. The Bank Council’s internal review as well as an independent one done by PricewaterhouseCoopers (PwC) showed no wrongdoing.
Swiss media gave his performance and explanations at the press conference mixed reviews, with French language media more generous than some in German-speaking areas. The right-wing UDC People’s Party continues to call for his resignation, but their own role in the scandal remains unclear. Hildebrand’s personal banking data was illegally shared by a Sarasin Bank IT employee with a lawyer who turned it over to Christoph Blocher, former member of the government and UDC party leader. Blocher has remained silent on the affair.
The full text of the press release Saturday from the Bank Council:
“At its meeting of 7 January 2012, the Bank Council of the Swiss National Bank (SNB) addressed issues concerning corporate governance and own-account transactions involving financial instruments. It became evident that, given the events of the past few days and developments in financial markets, as well as with a view to improving transparency, taking measures is in order.
“The Bank Council has therefore adopted the following resolutions:
With the support of external specialists, a comprehensive revision of the regulations and directives on own-account transactions involving financial instruments by members of the Enlarged Governing Board will be undertaken. The corresponding draft regulations and the revised directives for SNB employees are to be submitted to the Bank Council as soon as possible.“Furthermore, the Bank Council has decided that all bank transactions effected by members of the Enlarged Governing Board between 1 January 2009 and 31 December 2011 will be reviewed by external auditors (preferably KPMG or Ernst & Young).
“Until such time as the regulations and directives have been revised, members of the Enlarged Governing Board as well as staff members with access to privileged information must first get approval from the SNB’s Chief Compliance Officer for foreign exchange transactions which exceed CHF 20,000. The Audit Committee of the Bank Council will be informed periodically of such instances.”
ZURICH, SWITZERLAND – Philipp Hildebrand, chairman of the Swiss National Bank, met with the press at 16:00, following heavy media coverage and questions raised over the profits made from currency deals by Hildebrand or his wife in late 2011.
Hildebrand, who appeared tired but in form, first provided a lengthy summary of the incidents that led up to accusations that he may have acted illegally by allowing his family to make a profit on currency transactions. He then fielded questions in fluent German and French. He said that if he knew back in August what he knows today he would have acted differently, canceling his wife’s currency transactions and seeking the advice of the central bank’s governing board.
He was initially unaware of his wife’s purchase of several thousand dollars because “she has a strong personality” and she is personally interested in finance, he said. She owns a group of art galleries and she worked as a hedge fund trader for 15 years before turning to the art world. Plus, he added to chuckles, she reads the Financial Times every day.
He noted that he has come forward to talk about the business only now because it is only in the past two days that he has had the complete picture of what went on: the IT employee at Bank Sarasin could make a screen shot of transactions done by cell phone, but bank employees cannot make a printout, and the screen shot information was incomplete. What he saw apparently led him to believe that Hildebrand was taking advantage of his position to make currency deals. Hildebrand expressed some sympathy for the employee, but added that the man had made the mistake of turning to the wrong person with the information he held.
The Bank Council’s internal committee that reviewed the transactions and the independent investigation team from PricewaterhouseCooper’s had access to complete bank files for the Hildebrand family for the year 2011 and they found no evidence the chairman had broken the law.
Hildebrand said he knew who had received the information from the IT man, as well as who gave it to Weltwoche news magazine, but he preferred not to give names. He was on stage with the president of the Bank Council, which oversees the SNB, Hansueli Raggenbass, who didn’t hesitate to provide the name: lawyer Hermann Lei from Thurgau, who then gave the information to UDC People’s Party strategist and former leader Christophe Blocher.
The chairman of the bank says he regrets today that he did not take action in August, and he believes more stringest regulations are needed, and more transparency. For a start he would like to see all transactions over CHF20,000 by board members and their families approved in advance.
(Ed. note: GenevaLunch covered the press conference as it unfolded, on Facebook and Twitter.)
TSR reports that a Zurich judge officially opened an investigation into the matter of the IT employee who admitted to police he turned over to a lawyer private banking data on the Hildebrand family. The judge is not, however, investigating possible wrongdoing by Hildebrand.
NZZ noted before the press conference that the case leaves many questions open, in addition to whether or not the central banker has done wrong, notably, who is trying to undermine the Swiss central bank and why.
ZURICH, SWITZERLAND – The Swiss National Bank Wednesday took the unusual step of publishing its internal regulations governing the private financial activities of its senior management, as part of efforts to clear chairman Philipp Hildebrand’s name in the face of accusations he profited from his position.
By comparison, other central banks tend to make public their regulations concerning investment and disclosure for senior management.
The SNB also published the independent report from an investigation it had asked PricewaterhouseCoopers to make into Hildebrand’s transactions, which the banker’s wife, a former currency trader, said were her own.
Documents were taken from Bank Sarasin and given to a lawyer who is close to the right-wing UDC People’s Party that purportedly showed Hildebrand and his wife making a CHF60,000-plus profit on currency transactions.
Hildebrand is scheduled to meet the press Thursday in Zurich, to clarify the situation.
SNB internal regulations (German and French) and the PwC report (Ger)
Bloomberg/Business Week article, including EU and US Federal Reserve regulations on management private investment rules
ZURICH, SWITZERLAND – The latest media accusation in the debate over the purchase of dollars and profits from it by Philipp Hildebrand’s family surfaced Wednesday, with Weltwoche weekly political magazine obtaining copies of documents purportedly showing that the Swiss central bank chairman, and not his wife, made the currency transactions (background story, GenevaLunch).
The political magazine also says that Hildebrand bought and sold dollars at least two other times during the year. And it cites a client relations manager at Bank Sarasin as saying that the orders were placed by Hildebrand himself, not his wife as she has claimed. The banker, according to Weltwoche, is aware that he or she is breaking Swiss banking secrecy law in making the claim. A bank employee, but it is not clear if it is this banker or the one who turned himself into Zurich police 1 January for breaking data privacy laws, is reportedly by Weltwoche to be pressing charges against Hildebrand for breaking currency laws covering insider trading.
AP, which is widely picked up by American newspapers, ran a major story Wednesday based on Weltwoche’s article.
ZURICH, SWITZERLAND – Swiss National Bank President Philipp Hildebrand is getting heat from Swiss media over the profitable sale of dollars by his wife Kashya Hildebrand in October. It’s unclear who the source is for the figures, but both NZZ and Blick have reported that she made more than CHF60,000 in profit after buying and later selling $1 million.
Christophe Darbellay, president of the federal government’s Commission for Economy and Taxation, said that an internal bank council investigation has left “too many question marks”. At issue is the question of whether or not it is legal for SNB employees and their family members to make trades; the bank’s regulations are not a matter of public record.
The SNB president announced 6 September that the central bank was capping the over-valued franc, and it promptly fell against the dollar. Swiss media have been asking if the bank president’s wife was privy to inside information, which the bank’s governing council denies.
The bank has confirmed, according to Reuters, that “Kashya Hildebrand, a former currency trader who now runs an art gallery in Zurich, bought an unspecified amount of US dollars for herself and her daughter” but declared that an internal investigation turned up no wrongdoing.
Hildebrand has a good reputation in Switzerland although right-wing former UDC party leader Christoph Blocher recently criticized him strongly, and there has been media speculation that Blocher may in some way be linked to the information about Ms Hildebrand. although there appears to be no proof of this. Blocher has refused to comment on the matter.
Swiss franc weakens slightly but not enough for the SNB
ZURICH, SWITZERLAND – The Swiss franc weakened in trading Monday, to $.90 after earlier trading at $.88. It was also weaker against the euro, at 1.24, but with the day’s low at 1.22.
Philipp Hildebrand, Swiss National Bank chairman, told Swiss German papers over the weekend that the bank will continue to push the franc down, seeing it as still very over-valued.
Monday’s news that the consumer price index had dipped slightly, but for the first time in two years, will put further pressure on the central bank to get the franc down to avoid recession.
Swiss cabinet called in Hildebrand, central bank president, for special briefing
BERN, SWITZERLAND – The Swiss Federal Council says it is closely watching the record high Swiss franc situation, studying options and is ready to act if necessary, but it cautions against knee-jerk reactions that provide only short-term solutions. It issued a cautious statement Tuesday morning 9 August about the extraordinary meeting held by the governing group of seven Monday to review options in the face of market turmoil and investors pushing up the Swiss franc as a safe haven.
The group threw its support behind SNB (Swiss National Bank) President Philipp Hildebrand’s intervention in money markets last week and his promise to do more if the franc remains too high.
“It believes, as does the SNB, that the Swiss franc is clearly overvalued and that an energetic intervention is needed on the monetary policy front”, the Council said in the statement.
“We believe today that economic activity will slow down substantially in the quarters to come. The Federal Council is closely watching developments. It estimates that Switzerland’s position remains stronger than that of most of its neighbours but it is nevertheless aware of the need to watch the situation closely.”
China, Russia and India free trade deals are a focus
The Council noted a number of steps that have been taken since the start of 2011 to cushion the economy and business, noting in particular that it is keen to complete negotiations for free trade agreements with China, India and Russia before the end of 2012.
Philipp Hildebrand, president, Swiss National Bank
Bern, Switzerland (GenevaLunch) - The case of Switzerland will give economists material to mull over, with Swiss exports showing a surprising leap in February, increasing by 10 percent. The machine industry and electronics led the way, with 20 percent growth.
Imports grew, but more “timidly” says the federal government.
Switzerland now shows a positive trade balance of CHF2.5 billion, double what it was a year earlier, and this despite concerns about the strong franc in recent months.
Philipp Hildebrand, Swiss National Bank (SNB) president, speaking to a group of journalists in Geneva Tuesday noon qualified Swiss exports as “remarkably resilient” but he warned that the Swiss economy will eventually see growth slow down as a result of the impact of the Swiss franc. The SNB 17 March revised upwards to 2 percent its forecast for growth of the Swiss economy in 2011, cautioning at the time that growth will slow down by 2012 due in part to the strong franc.
Hildebrand points to three risk areas for the Swiss economy: the high Swiss franc, the uncertain situation in the Middle East and the problems created by the earthquake and tsunami in Japan.
Bloomberg reports Tuesday that the Swiss franc “gained 12 percent over the last year versus the euro, the currency of its main trading partner, eroding exporters’ competitiveness. Against the dollar, it reached a record 88.52 centimes per dollar on March 17.”
Bern, Switzerland (GenevaLunch) - Switzerland’s two biggest banks, UBS AG and Credit Suisse Group, need to increase their capital reserves beyond international standards, said on 4 October, a committee of public-private experts appointed by the Swiss Federal Council to address the issue of “too big to fail.”
The Committee of Experts believes that both banks are indeed “too big to fail,” but that measures should be put in motion to prevent any possible collapse (not only of the banks but of the Swiss economy).
The new proposal, backed by the Swiss National Bank, SNB, and the country’s financial regulator Finma; goes beyond the Basel III rules agreed to last month by the 27 member countries of the Basel Committee on Banking Supervision.
The Basel III rules establish reserves of 7 percent in common equity and 10.5 percent in total capital, while the new proposal require much higher reserves by 2019; 10 percent and 19 percent respectively.
The committee also proposed specific oversight measures in core areas including liquidity, risk diversification and organisation.
Zurich: ready to shop again
Zurich, Switzerland (GenevaLunch) - The Swiss franc rose against most other currencies Tuesday 11 May, while the euro wobbled: a rise in Swiss consumer confidence boosted the Swiss currency, while doubts surfacing in the wake of the eurozone bailout weakened the euro. The franc has been steadily appreciating against the euro, with the Swiss central bank intervening since March to keep the price from rising too rapidly. It was trading at 1.41 at the end of the day. Six months ago it was at CHF1.50 to the euro.
Spot gold also rose, to its highest price since the Lehman Brothers collapse in 2008: $1,232.40 a troy ounce, as investors appeared to seek safe havens.
Philipp Hildebrand, chairman of the Swiss National Bank, opened a high-level meeting of international monetary system expertsin in Zurich Tuesday. He remarked that “discontent with what is often perceived as excessive exchange rate volatility has been an important source of dissatisfaction with the present international monetary system. What constitutes excessive exchange rate volatility, and whether domestic policies or the international monetary system are at the root of it, is a matter of legitimate debate.”
Historical exchange rate graph, Swiss franc/euro, November 2009 to May 2010
Links to other sites: AFP, Bloomberg/Business Week, Financial Times
Swiss National Bank's Philipp Hildebrand
Zurich, Switzerland (GenevaLunch) – Philipp Hildebrand has been the chairman of the Swiss National Bank’s three-man governing board since 1 January 2010. In an interview with Geneva’s Le Temps published 17 January, he expounds on several of the issues facing the central bank today.
Relatively upbeat on Swiss economy
Hildebrand is moderately optimistic about Switzerland’s economic prospects for the coming year. The pace of inflation will determine the rate at which monetary policy is normalized over the coming months, he says. As to the risk of inflation getting out of hand, Hildebrand says that the independence of the world’s central banks is the best insurance against the temptation by governments to inflate their way out of huge public debts.
Philipp Hildebrand, SNB
Geneva, Switzerland (GenevaLunch) – The incoming head of the Swiss National Bank, Philipp Hildebrand, says Switzerland needs tighter banking regulations than most countries, due to its size relative to the country’s economy. Total banking assets exceed seven times Switzerland’s GDP, he notes, and they are very concentrated, with the two big banks, Credit Suisse and UBS, having two-thirds of the total.
Recovery may be underway but the costs to the global economy, longer term, loom large. “The potential costs of the support measures taken – capital injection, asset purchases, and guarantees of bank debt – in the G7 countries together with Australia, the Netherlands, Spain and Switzerland amount to about 20 percent of GDP in these economies,” he says, although actual outlays have been about 8 percent.
Hildebrand, who takes over as SNB chairman in January 2010 when Jean-Pierre Roth retires, made his remarks in a speech Wednesday evening 18 November at the University of Geneva.
The SNB is focusing on two areas of bank regulation changes, in line with recommendations drawn up by the Financial Stability Board (FSB) The FSB was created in April 2009 and is housed at the Bank for International Settlements in Basel, Switzerland.
Philipp Hildebrand
Thomas Jordan
Zurich, Switzerland (GenevaLunch) – Philipp Hildrebrand, age 46, 8 April was named chairman of the Governing Board of the Swiss National Bank (SNB), effective 2010, taking charge at that point of the SNB’s Department I, with responsibility for economic affairs, international affairs, legal and property services, and support functions. He will take over from Jean-Pierre Roth, who retires at the end of 2009. Thomas Jordan, also 46, was named vice-chairman. A new member of the Board has been named: Jean-Pierre Danthine, from Vaud, who heads the Swiss Finance Institute.
