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.
Possible overheating in real estate: tighten mortgage requirements, gov’t told
Home sweet home in Switzerland: signs the market is overheating
BERN, SWITZERLAND – The OECD (Organization for Economic Cooperation and Development) 2012 report on Switzerland, issued this week, cautions Bern against allowing consumer debt to build and warns that the real estate market may be overheating.,
The report’s overall assessment is that while Switzerland is weathering the eurozone crisis reasonably well, it remains at risk from the ongoing sovereign debt problems and economic stagnation in the region. The high Swiss franc will continue to pose problems for the export industry, the OECD notes.
“Exceptionally low” short- and medium-term interest rates are contributing to a mortgage boom and high real estate prices, the report states. Some areas are now showing signs of overheating, the report concludes. “Taking into account the high gross debt of households, the risk could increase, for small internal market banks, if there is a sudden rise interest rates.” Household debt in Switzerland is one of the highest in the OECD, it notes, although household wealth is “not negligible” taking into account assets held by the pension system.
Other key points from the report:
- The country’s two big banks, Credit Suisse and UBS, should be required to have higher leverage ratios than the 5 percent proposed by parliament, common equity should play a greater role and the reforms passed by parliament in 2011 should be implemented more quickly than the scheduled completion date of 2019. Parliament’s capital ratio of 19 percent has been praised as going beyond Basel III requirements for banks around the world, but the size of the two big banks in relation to the Swiss economy creates a risk that remains too high;
- Fiscal reforms would encourage economic growth; these should include a higher TVA (value-added tax) with broader coverage to consolidate growth and reduce distortion in the system. At the same time, the tax rate for individuals should be lowered, the OECD recommends, to encourage growth. Switzerland’s tax rates are modest on an international scale, but this is offset by the burden of mandatory health insurance and pensions.
- A number of measures are recommended to reduce CO2 in line with agreed limits by 2020; the OECD recommends an emissions tax on vehicles, saying this is a relatively inexpensive way for the country to reduce CO2 emissions, and it suggests peak traffic and congested area use taxes.
GENEVA, SWITZERLAND – Italy’s Prime MinisterSilvio Berlusconi agreed late Tuesday 8 November to step down, but on condition that the parliament pass two key financial reforms. There were signs Wednesday that parliament would play his game, with the leader of the opposition party, Dario Franceschini, saying his party is ready to approve the law by the end of the week. But even this was not enough to contain borrowing costs and calm markets, reports the Financial Timesin the early afternoon: “The sell-off in the Italian bond market spread into equity and currency markets, with the Eurofirst 300 down more than 2 per cent and the euro down 1.5 per cent against the dollar at 1.3627.”
Reuters had written early Wednesday that markets were set to rally on the news of Berlusconi’s departure after some 20 years of colourfully marking Italian politics.
Berlusconi told his own TV station Canale 5 Wednesday that he will not run in 2012, when early elections are held. “I will resign as soon as the law is passed. Since I believe there is no other majority possible, I see elections being held at the beginning of February and I will not be a candidate in them,” reports Xinhuanet. He repeated his determination not to stand again to newspaper La Stampa.
Doris Leuthard, Switzerland's president, is serving a one-year term
Bern, Switzerland (GenevaLunch) – The seven-member ruling council of the Swiss government, the Federal Council, has proposed that the presidency, which rotates among them, become a two-year rather than one-year post. The rationale is to give the president the opportunity to complete projects and to take better advantage of experience gained. The impetus to reform the system did not come from the Federal Council itself but from Parliament, which asked it in 2004 to propose reforms.
President Doris Leuthard, who met with journalists Thursday before the council announced its news, was asked if it is sometimes difficult to manage with a seven-person cabinet that shares power. She laughed and remarked that group decisions are never easy.
China’s “hukou” or housing registration system has been part of the country’s social system for more than 50 years, but a group of major newspapers Monday 1 March put pressure on the government to end the system, which they say discriminates against migrant workers in particular. The registrations were originally designed as part of massive social planning changes in the 1950s. It identifies people, based on their origins, as urban or country dwellers. Social services are based on these labels, and one result is that people registered as coming from the countryside are often denied services in cities. The government published a discussion paper on reforms a few weeks ago. Twelve newspapers, in an unusual move, this week printed a joint editorial calling for the system to end, in advance of China’s lawmakers holding their annual meeting.
Links to other sites: BBC, East Asia Forum, Xinhua
Bern, Switzerland (GenevaLunch) – Le Temps, the main newspaper for intellectuals in French-speaking Switzerland, is calling for reforms to the way the Swiss Federal Council works, in the wake of a series of international crises.
Le Temps is harshly critical Wednesday morning 10 February in an editorial that calls for the whole “collegial” approach to government to be re-thought. The Swiss government consists of seven federal councilors from five parties, approved by Parliament, who work behind closed doors. They reach decisions that are then supported publicly by the group, which speaks with one voice.
But Le Temps argues that the group has been too much influenced by the members’ parties since the days when Christoph Blocher ruled the right-wing UDC, and that it is increasingly difficult for the Council to make decisions quickly, after adequate reflection. The councilors are also overloaded with work as ministers in charge of government offices, departments and ministries, says the Geneva-based newspaper. In a related article Le Temps points to the slowness of the council in making decisions about banks and double taxation agreements, but most importantly a lack of clear communication and strategy as evidence that reform is needed.
Thomas Held, director of the think tank Avenir Suisse, says in an interview that is part of Le Temps’s package of articles that the government is being overtaken by events and is not guiding reactions as it should, as a result.
US President Barack Obama’s announcement 21 January that he intends to limit the size of some lucrative activities by American banks was cheered by France, but Asian markets have reacted negatively and the dollar lost gains it made earlier in the week. France’s Finance Minister Christine Lagarde told French media that the US was finally following her country’s lead and regulating markets for greater stability. Asian stock markets fell for a fifth straight day, with fears that China will raise interest rates coupled with concern that US banking curbs will weaken that country’s economic recovery.
Links to other sites: Bloomberg, Market Watch, NPR, Reuters,
The US Senate banking committee has proposed a significant change to the US bank regulatory system, calling for a single body to regulate banks. The move would diminish the powerful role of the Federal Reserve in this area and would replace overlapping regulation by several groups, including the Federal Deposit Insurance Corporation and smaller regulators, with one new agency. The proposed legislation would also create a consumer financial protection agency. The powerful banking committee, under the direction of Senator Chris Dodd of Connecticut, has pushed into the open a struggle that has been going on behind the scenes to reform the US banking system: Dodd Tuesday 10 November presented the committee’s reform proposal, which goes substantially further than President Barack Obama’s suggested reforms. Initial reactions indicate that opposition from several corners, but especially from the Federal Reserve, will make it a tough fight.
Links to other sites: Financial Times, New York Times, NPR, US Senate banking committee site
US President Barack Obama told the US Wednesday that the time for bickering over healthcare reform is over, as he stepped directly into the fight after weeks of leaving it mainly to Congress, to push for his plan for a non-profit public insurance plan. His appearance on prime time television was aimed primarily at the American middle class, says NPR, and he took pains to reassure those who like their insurance plans that these would not be affected. The speech comes as his public ratings have been sliding. BBC, Fox News, The Globe & Mail, Canada, Huffington Post
Obama has faced harsh critics over healthcare reform, but another battle has been grabbing public attention, over US troops in Afghanistan. Growing public resistance to building troops, which Obama’s advisors have been warning him about, came into the limelight with the publication by Associated Press of photos of a dying soldier, despite the family’s wish for them to remain private. Guardian, UK, MSNBC
US President Barack Obama focused in his weekly national address on what he labeled “misinformation” being spread as a dubious way of fighting his efforts to reform the healthcare system. “Let me start by dispelling the outlandish rumors that reform will promote euthanasia, cut Medicaid or bring about a government takeover of health care. That’s simply not true. This isn’t about putting government in charge of your health insurance; it’s about putting you in charge of your health insurance.” (NPR) Former Republican office holders Newt Gingrich and Sarah Palin referred to the plan in public attacks on it, with Gingrich saying it could lead to euthanasia and Palin calling it evil. CS Monitor
In an extraordinary side story, National Public Radio‘s Howard Berkes writes about the soberign experience of joining a two-day free clinic in Virginia in July, where for “two-and-a-half days, about 800 doctors, nurses, dentists and optometrists treated 2,700 uninsured and underinsured people, most from Appalachia. No one was asked for an insurance card. There were no co-pays. And there were no bills.”
US President Barack Obama addressed the US public in a key television broadcast, to insist that a reform of the healthcare system must make it through Congress by the end of 2009. “We will pass reform that lowers cost, promotes choice and provides coverage that every American can count on,” he said, noting that he would hear out all proposals except for funding it through a tax on middle class Americans. Obama argued that the reform must lower, not increase, the US deficit, and that it is at the centre of economic recovery. BBC, NPR
Bern, Switzerland (GenevaLunch) - The upper house of Parliament this week has voted to back the government’s proposals to improve the financial health of the federal unemployment system. The national fund is currently CHF5 billion in the hole and is likely to grow to a CHF6.3b deficit by 2010. If the lower house and a possible public referendum also back the measure, as they are expected to do, workers will see several changes, starting with higher deductions in 2011 and a longer paying-in period before they can claim full benefits.
The proposal as it stands today would increase workers’ payments from 2.0 percent of their salary to 2.2 percent. As a temporary measure to reduce the fund’s debt, this would be increased to 2.3 percent for several years and employees earning CHF126-315,000 would pay an additional 0.1 percent for some years as a “solidarity” measure.
US President Barack Obama has become the first American sitting president to appear on a late night talk show, on the Jay Leno show Thursday 19 March. Obama used the talk show in order to reach ordinary Americans, according to an MSNBC report. The president spoke of personal issues such as the promise of a white house dog and how “cool” it is to fly in Air Force One, He also used the time to discuss economic reform and to promote financial regulation reform.
Critics accused Obama of being distracted from the serious issues and demeaning his office. Viewers praised his effort to give the people faith in their government in dark financial times. BBC
