Pfrunder's original winning 2005 entry for the new CHF50 note; the SNB says the final version will differ from this and will be unveiled shortly before production
Swiss bank note, early design (final will differ)
ZURICH/ BERN – New Swiss bank notes, tentatively scheduled to make their appearance towards the end of 2012, are being delayed for a year.
The Swiss National Bank says that “unexpected technical problems were encountered in an early production stage” and that it will announce the issue date “as soon as the first banknote denomination is ready for distribution.”
The delay does not pose significant problems, with the current banknotes considered to offer a high standard of security and they can be produced in sufficient quantities, so “the supply of high-quality banknotes to the economy is guaranteed at all times.”
The central bank has not yet unveiled the final designs of the new notes. It held a competition in 2005 for the design and published the 12 finalists’ submissions.
It announced in January 2007 that the winner was Swiss graphic artist Manuela Pfrunder. The bank said at the time that “In the SNB’s competition for the artistic design of a new banknote series, back in November 2005, Manuela Pfrunder was placed second.
When the designs of the three award winners were developed further, Manuela Pfrunder’s work proved to be particularly suitable for a new banknote series. Nevertheless, her designs will have to be thoroughly reworked – both artistically and technically – before they reach production stage.”
The project has been delayed previously. Philipp Hildebrand, then vice-chairman of the bank, announced in late 2008 that “Manuela Pfrunder, the graphic artist, has further developed her drafts and completed the design for the CHF 50 note, taking the technical aspects of banknote production into account. At its meeting of 29 August 2008, the SNB Bank Council approved the design of the new CHF 50 banknote and gave the go-ahead for the further work that is to be done.”
Hildebrand noted that “A particular challenge is posed by the security features that will be used in the new banknote series for the first time. Based on the progress of work to date, the SNB is confident that the first banknote in the new series will be ready for production within the planned time period. The CHF 50 banknote will mark the beginning of the new series of banknotes and is scheduled to be issued in autumn 2010. The appearance of the new banknote and the security details for the entire series will be presented shortly before the scheduled issue date.”
Thomas Jordan, acting chairman of the Swiss National Bank
ZURICH, SWITZERLAND – The Swiss central bank does not see any risk of inflation for Switzerland in coming months, nor any need to reduce the level of liquidity. However, distortions in the mortgage and real estate market could increase and the Swiss government will soon look at the possible need to intervene.
Thomas Jordan, vice chairman and, since Philipp Hildebrand’s resignation 9 January, interim chairman of the Swiss National Bank (SNB), was addressing the Swiss American Chamber of Commerce Tuesday 6 February in his first major policy statement since taking the reins a month ago. Jordan says the central bank is adhering to its policy of keeping a firm cap on the Swiss franc, a policy that “corrected the overvaluation of the Swiss franc to some extent”.
“Thanks to this decision, investment planning for export-oriented companies has been facilitated, and the risk of both deflation and severe structural damage to the Swiss economy has been reduced. Without this policy measure, the extreme overvaluation of the Swiss franc and its volatility would probably have persisted.”
The SNB set a minimum exchange rate of CHF1.20 per euro in early September of 2011.
A whiff of optimism, but “subdued” outlook might be best we can expect
He offered a crumb of optimism for Switzerland’s financial outlook, saying that “if the European authorities were to credibly commit to a sustainable solution soon, existing uncertainties would be reduced substantially. In such a scenario, demand for perceived safe financial assets would fall in general, and for the Swiss franc in particular”
But he emphasized that we are still living in a world with “substantial downside risks” and the picture could prove worse than today’s “subdued” economic outlook.
“Economic growth will continue to be driven by emerging markets. However, we expect growth rates in China and India – the most important countries in emerging Asia in economic terms – to remain below potential in the near term, due to prior monetary policy tightening, high inflation, and sluggish external demand. Looking at the US, recent data suggest that the situation has improved slightly. However, this should not hide the fact that economic growth in the US is likely to remain sluggish.”
He cites continuing high unemployment in the US and “the fiscal environment remains contractionary. For the euro area – Switzerland’s most important trading partner by far – the economic outlook has deteriorated since last autumn. Uncertainty about an escalation of the sovereign debt crisis is undiminished. As a result, the euro area is likely to face a mild recession in early 2012.”
Liquidity, interest rates and mortgages under debate
Jordan says the SNB’s policy has raised two questions.
“it is argued that the significant increase in liquidity since August 2011 may trigger inflation risks in the longer term. Given the current economic situation, however, expanding the supply of liquidity was a necessary monetary policy response. There is currently absolutely no risk of inflation in Switzerland. First, headline inflation turned negative in October 2011 and continued to decline through the end of the year. It is assumed to fall even further in early 2012. Second, neither our inflation forecasts nor the medium-term inflation expectations from our surveys of households and companies show any signs of inflation risks. Consequently, there is no necessity whatsoever for the SNB to reduce the level of liquidity for the time being.”
The other is the impact of long-term very low interest rates on the housing market.
“On the other hand, a long period of very low interest rates may lead to imbalances in the domestic credit and real estate markets, which may pose serious risks for financial stability. We are well aware of these risks and are analyzing them very carefully. However, due to the exceptional monetary policy situation, interest rates cannot readily be increased to address such threats. In other words, at the current juncture, monetary policy cannot react to these imbalances with conventional monetary policy instruments. Therefore, the Swiss Government is due to decide soon upon the introduction of so-called macroprudential instruments that can be used – if necessary – to mitigate potential credit and housing market distortions.”
Taxpayers get CHF1 billion via federal, cantonal budget boosts
ZURICH, SWITZERLAND – Swiss federal and cantonal budgets look set to receive some CHF1 billion from the Swiss National Bank, which expects to end 2011 with a profit of CHF13 billion. A little over one-third of the profit, CHF5b, is thanks to the meteoric rise of the price of gold during the year. The other CHF8 billion is due to foreign currency positions.
The consolidated result for the year is “likely to be somewhat better” as UBS repays its 2008 bailout debt through what is called the stabilization fund.
The other CHF12b will be distributed roughly as follows:
- allocation to provisions for currency reserves, CHF3.2 billion
- CHF5b to fill the gap in the distribution reserve that goes to the Confederation and the cantons
- remaining profit to the distribution reserve.
Definitive figures and details, including movements in foreign currency positions during the year, will be released 8 March.
SNB chairman Philipp Hildebrand, who resigned following a scandal over dollars purchased by his wife, has been praised this week by a number of financial leaders outside Switzerland for his exemplary work as a central banker. EU Central Bank President Mario Draghi told a Frankfurt press conference 11 January that “we all regret the developments that led to Mr Hildebrand’s resignation because I think we will miss a very, very good central bank governor.”
Ed. note: The Financial Times has published a commentary on the implications for European financial leadership of Hildebrand’s tenure at the SNB (free, registration required)
TSR Wednesday evening ran an interview with Kashya Hildebrand from Italian TV, where she apologized to Switzerland and her husband
BERN / ZURICH, SWITZERLAND – Swiss political and economic circles were still abuzz Wednesday 11 January with the fallout from the resignation Monday of Philipp Hildebrand as chairman of the Swiss National Bank. New developments:
- the Swiss president came in for criticism for her strong backing of Hildebrand but defended herself, saying she was expressing the view of the Federal Council last Friday
- the selection process for a new bank head got underway
- Hildebrand’s contractual pay package was made public – under the terms of his contract he will continue to receive his annual salary for one year, which was CHF994,800 in 2010; he cannot work for a bank during the next six months, or 12 months in the case of the big banks, under SNB rules
- Thomas Jordan, appointed interim chairman until a new head is found, has made it clear he will maintain the CHF1.20/euro cap on the Swiss franc and continuity appears to be guiding bank policy for now
- Hildebrand’s wife Kashya, interviewed by Reuters in Singapore at an art fair, ended some speculation by saying that she had the idea for the currency exchange so it is her fault but yes, they are still happily married.
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
ZURICH, SWITZERLAND – Philipp Hildebrand, chairman of the Swiss National Bank, has resigned, effective immediately, the SNB has announced. He will issue a press statement at 15:15. Details to follow
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.
Philipp Hildebrand, chairman, Swiss National Bank
ZURICH, SWITZERLAND – A computer system employee of Bank Sarasin turned himself into police 1 January, it was revealed late Tuesday, after sharing documents linked to currency transactions made by the family of Philipp Hildebrand, chairman of the Swiss National Bank.
Swiss data protection and privacy laws make it illegal to share such information.
The documents were given to an attorney who is close to the UDC, Switzerland’s right-wing People’s Party. The employee, who was promptly fired by the bank says the lawyer made an appointment to meet Christoph Blocher 11 November. Blocher is a former leader of the UDC who was a member of the Swiss government until 2007.
Swiss media have been speculating about the role of Blocher in the leak to media that Hildebrand’s wife, a former currency trader who owns a gallery in Zurich, had made more than CHF60,000 in profit buying and selling one million dollars around the time that her husband was capping the Swiss franc. She spoke about the transaction for the first time on television Tuesday, saying that as a former currency trader she saw the “ridiculously” low level of the euro as an opportunity and that the day after she purchased dollars she informed the Swiss National Bank of the transaction, made in her own name, to ensure transparency.
TSR reports that not only did the Bank Council, the governing body that oversees Swiss National Bank activity, investigate and clear Hildebrand of suspicion of illegally benefiting personally from his position, but it asked PriceWaterhouseCoopers to carry out an independent investigation, which also cleared Hildebrand.
Christoph Blocher told Swiss German television Tuesday evening that he intends to remain silent for now.
Background story, GenevaLunch 3 January
Bank Sarasin’s public statement in full
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.
Source: Swiss National Bank, 15 December 2011
Updated 10:20 ZURICH, SWITZERLAND – The Swiss National Bank is keeping its promise to “enforce the minimum exchange rate of CHF1.20 per euro with the utmost determination”, including buying unlimited quantities of foreign currency if necessary, it said Thursday morning 15 December in an assessment of Switzerland’s monetary policy.
“Even at the current rate, the Swiss franc is still high and should continue to weaken over time.”
Philipp Hildebrand, SNB chairman
Phillip Hildebrand, chairman of the governing board of the SNB, in his year-end talk to the press Thursday described the global outlook as “subdued” and said the SNB has adjusted its growth assumptions for the euro area substantially downwards.
“The outlook for global growth is nevertheless subdued, and has, if anything, deteriorated since the last monetary policy assessment. The most recent US economic data have been somewhat better than expected, but the escalation of the European debt crisis has clouded the economic outlook for the euro area. Bond yields for fiscally weak states have risen markedly. The growing unease among market participants is also reflected in the increased volatility on the financial markets. Mounting borrowing costs and the high level of uncertainty are contributing to a marked worsening of the business climate in the euro area.”
Hildebrand added that “uncertainty about the future outlook for the global economy remains extremely high. In particular, the European sovereign debt crisis poses grave risks for the international financial system and the real economy.”
Swiss economy affected by eurozone fragility, with falling growth rate
The SNB Thursday lowered growth expectations for the economy in 2012 to 0.5 percent and aiming to keep the three-month Libor range (official lending rate to banks) at around 0 percent. “The substantial appreciation of the Swiss franc over the summer is weighing heavily on the Swiss economy. For 2011 as a whole, real GDP growth of 1.5–2.0 percent can be expected. This is only because of the favourable economic development in the first half of the year,” the central bank notes in a statement.
Fewer jobs, less spending, housing construction slowdown
Hildebrand noted that the Swiss slowdown will have an impact on the jobless rate, which will then impact consumer spending and the rate of new home construction.
“The introduction of the minimum exchange rate has corrected the massive overvaluation of the Swiss franc and has given companies a sounder basis for their investment planning. This notwithstanding, the situation for a big part of the economy remains difficult. Waning global demand will continue to hold back export growth. Economic uncertainty, coupled with a difficult earnings situation for many companies, will curb corporate investment. Moreover, since October, the seasonally adjusted unemployment figure has risen again slightly. The deterioration in the labour market should constrain both consumer spending and investment in residential construction.”
Home loans nevertheless remain strong, says Hildebrand, with domestic mortgages (and corporate lending) continuing “to see robust growth. In the third quarter of 2011, lending standards and conditions for mortgages remained largely unchanged. By contrast, banks reported a slight tightening of lending standards and conditions for corporate loans – especially loans to large companies. Low interest rates continue to have a favourable effect on the demand for loans. In addition, the robust growth in real estate prices, particularly prices for owner-occupied apartments, continued unabated in the third quarter.”
Inflation likely to dip into deflation briefly
The bank sees no risk of inflation in the “foreseeable future”, forecasting an inflation rate of 0.2 percent for 2011, dipping to -0.3 percent in 2012, rising to 0.4 percent in 2013. The SNB notes that “in the short term, inflation will dip into negative territory sooner, owing to the effects of the earlier currency appreciation, which have been stronger than expected. In the longer term, the worsening of the growth outlook for the euro area is dampening inflation.” The forecasts are based on assumptions about a 0 percent Libor and weakening Swiss franc, it cautions, and instability in the global financial system, particularly in the eurozone are creating an outlook that is uncertain.
Swiss wages up
ZURICH, SWITZERLAND – Markets let the Swiss franc slip slightly Wednesday 14 December while awaiting news from the Swiss National Bank 15 December, which will share its monetary policy assessment in the morning.
Some analysts are predicting the central bank will raise the cap from CHF1.20 to the euro to CHF1.25 or higher, to help exporters. Others are insisting the SNB will not budge from the CHF1.20 mark and yet others are speculating that interest rates, at historic lows, will move into the negative.
2010 saw Swiss companies investing more abroad, foreign investors slowing their capital inflows
The SNB Tuesday 13 December published its 2010 direct investment and Swiss international investment position reports, where it made it clear that the continuing high franc was already taking its toll on investments last year. Swiss companies invested more abroad while foreign direct investors in Switzerland showed a 32 percent drop in capital inflows.
Dollars, francs, euros pounds, yen - a little sweetener added by central banks Wednesday
BERN, SWITZERLAND – The Swiss National Bank (SNB) WEdnesday 30 November joined with other major central banks for a series of “coordinated actions to enhance their capacity to provide liquidity support to the global financial system.
The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity,” the SNB says in a statement issued during the afternoon.
Stock markets in the US rose on the news that came about the time markets in New York opened.
The news was a bright spark in a gloomy UK, where some 2 million workers are striking today and in Brussels, where finance ministers are holding urgent sovereign debt crisis talks.
“The euro and European shares surged on the news, which came after euro zone finance ministers agreed to ramp up the firepower of their bailout fund but acknowledged they may have to turn to the International Monetary Fund for more help,” Reuters reports.
Specifically, the central bank measures taken include:
- making it cheaper for banks to buy dollars starting 5 December: “lower the pricing on the existing temporary US dollar liquidity swap arrangements by 50 basis points so that the new rate will be the US dollar overnight index swap (OIS) rate plus 50 basis points”
- as a contingency measure: the central banks “have also agreed to establish temporary bilateral liquidity swap arrangements, so that liquidity can be provided in each jurisdiction, in any of their currencies should market conditions so warrant”, noting that for now only the dollar needs liquidity, among non-domestic currencies
- The SNB will establish a temporary network of reciprocal swap lines in cooperation with other central banks: “This action will allow the SNB to provide Swiss francs to these central banks when required, as well as enabling the SNB to provide liquidity, should it be needed, in Canadian dollars, British pounds, Japanese yen, and euros (in addition to the existing operations in US dollars). The SNB continues to closely monitor the developments in global money markets.”
The other central banks have taken some additional actions. The European Central Bank notes that “In addition, the initial margin for three-month US dollar operations will be reduced from currently 20% to 12% and weekly updates of the EUR/USD exchange rate will be introduced in order to carry out margin calls. Those changes will be effective as of the operations to be conducted on 7 December 2011.”
Swiss central bank payouts down, with overvalued Swiss franc
ZURICH, SWITZERLAND – Swiss cantons and communes won’t be seeing their budgets boosted this year by additional monies from the Swiss central bank, and a new agreement between the federal government and the bank should remove some of the uncertainty linked to this income.
The Swiss National Bank (SNB) and the Federal Finance Department said Monday 21 November they have reached a new agreement covering how the SNB’s profits are shared, for 2011-2015. The SNB during the next five-year period will be sharing CHF1 billion annually with the 26 cantons assuming the central bank has a profit after it complies with its reserves-building obligations.
“It remains unclear when the next distribution payment will take place, since this will depend on future developments in the financial markets,” the SNB said Monday 21 November.
The bank had no profits in 2010 and appears unlikely to do so in 2011 largely because of the amount it is spending to keep the overvalued Swiss franc from rising. The new agreement is designed to provide greater medium-term stability for cantons and the federation to plan, with a set amount per year, compared to the fluctuations of the most recent five-year period.
Should the central bank’s distribution reserves exceed CHF10 billion, the amount going to the cantons and federal government will be increased, with the finance department and the SNB deciding the amount.
ZURICH / BERN, SWITZERLAND – The Swiss National Bank is showing a consolidated profit of CHF5.8 billion for the first nine months of the year, thanks primarily to gold prices. The profit was achieved despite an over-valued Swiss franc that caused losses of CHF4.7 billion.
Other currency positions resulted in gains of CHF5 billion, giving the central bank a net currency position of CHF0.3b. The over-valued Swiss franc and intervention by the SNB, particularly in August and September, were the main factors in the bank’s currency situation at the end of nine months. The bank notes that at the end of the quarter, the US dollar was trading 3.1 percent lower than at the beginning of the year, and the euro 2.8 percent lower.
The SNB’s currency investments are 55 percent in euros, 25 percent in dollars, 9 percent in the yen, 4 percent in sterling, 4 percent in Canadian dollars and 3 percent in other currencies.
The price of gold at the end of September accounted for the bulk of the profit: it was around CHF47,089 per kilo, giving the bank a valuation gain of CHF5.0 billion. But the bank noted in a statement issued Monday 31 October that “the SNB result depends largely on developments in the gold, foreign exchange and capital markets. Consequently, strong fluctuations are normal, and only provisional conclusions are possible as regards the annual result.”
UBS bailout fund loan down by CHF4b to outstanding CHF7.9b
The stability fund, created for the government’s bailout of bank UBS in 2008, contributed CHF573 million in interest payments, to the central bank’s profits. “The loan to the stabilisation fund was reduced from CHF 11.8 billion (USD 12.6 billion) to CHF 7.9 billion (USD 8.8 billion), and the total risk exposure decreased from almost CHF 14 billion to around CHF 8.7 billion.”
Swiss central bank to protect the franc with "utmost determination"
ZURICH, SWITZERLAND – The Swiss franc’s cap against the euro will be protected “with utmost determination”, the Swiss National Bank said Thursday 15 September, repeating its earlier stance that it is prepared to “buy foreign currency in unlimited quantities” to get the exchange rate of the “massively overvalued” franc back to more appropriate levels.
The SNB used its strongest language yet in describing the “acute threat to the Swiss economy and the risk of deflationary development that spring from the massive overvaluation of the Swiss franc”.
It pointed to the worsening of the economy, saying “the outlook for the advanced economies, in particular, has worsened considerably” and that the high franc coupled with softening international demand will result in GDP growth of 1.5-2.0 percent only because of growth in the first half of the year.
“Without the stabilizing effect of the minimum exchange rate there would be a substantial risk of recession”.
Swiss franc pegged to euro: central bank hopes it will be less attractive today
ZURICH, SWITZERLAND – The Swiss National Bank (SNB) Tuesday late morning announced it is fixing the Swiss franc to the euro at a rate that will not be allowed to slip below euro 1.20 and says it is “prepared to buy foreign currency in unlimited quantities”.
Its action was accompanied by the toughest words to date on what it referred to as the “current massive overvaluation of the Swiss franc”, saying this “poses an acute threat to the Swiss economy and carries the risk of a deflationary development.” Reuters remarked that it had used “some of the strongest language from a central bank in the modern era”.
The SNB says it is “aiming for a substantial and sustained weakening of the Swiss franc. With immediate effect, it will no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF1.20.”
The SNB statement notes that “even at a rate of CHF 1.20 per euro, the Swiss franc is still high and should continue to weaken over time. If the economic outlook and deflationary risks so require, the SNB will take further measures.”
The euro had lost more than 13 percent against the Swiss franc since the start of 2011 before the SNB’s decision. Bloomberg reports that later in the day “The franc snapped four days of gains versus the euro, dropping as much as 8.7 percent. It traded at 1.2025 at 3:42 pm in Zurich and was at 85.49 centimes versus the dollar.”
Swiss franc (photo, ©2011 Ellen Wallace)
Update 09:30 ZURICH, SWITZERLAND – The Swiss National Bank reacted Wednesday morning 3 August to the rapid rise of the Swiss franc, calling it “massively overvalued” and saying it will “very significantly increase the supply of liquidity to the Swiss franc money market over the next few days.”
“This current strength of the Swiss franc is threatening the development of the economy and increasing the downside risks to price stability in Switzerland. The SNB will not tolerate a continual tightening of monetary conditions and is therefore taking measures against the strong Swiss franc,” the central bank noted in a statement.
Specifically, the bank’s actions include:
- aiming for a three-month Libor as close to zero as possible, narrowing the target range for the three-month Libor from 0.00–0.75% to 0.00–0.25%
- very significantly increase the supply of liquidity to the Swiss franc money market over the next few days: expand banks’ sight deposits at the SNB from currently around CHF30 billion to CHF80 billion.
- with immediate effect, the SNB will no longer renew repos and SNB Bills that fall due and will repurchase outstanding SNB Bills, until the desired level of sight deposits has been reached.
The SNB says it is watching markets closely and will intervene again if necessary, noting that the combination of a worsening global economic outlook and sharp appreciation of the Swiss franc during the last few weeks has resulted in a substantial deterioration of the outlook for the Swiss economy.
ZURICH, SWITZERLAND – The Swiss National Bank’s (SNB) half-year report issued Friday is hardly cheering news at the start of a long national holiday weekend, with an interim consolidated loss of CHF10.8 billion francs thanks to the strength of the Swiss franc against major currencies, before allocation to reserves. “The SNB result depends largely on developments in the gold, foreign exchange and capital markets. Consequently, strong fluctuations are normal, and only provisional conclusions are possible as regards the annual result,” the central bank says in a statement.
The SNB in 2010 showed a loss of CHF19.17b in 2010 and a profit of CHF9.96b in 2009.
Foreign currency position losses were some CHF9.9 billion, January to June, due mainly to exchange rate-related valuation losses of around
CHF 11.7 billion. The US dollar depreciated by 9.6 percent, the yen by 8.9 percent and the euro by 2.4 percent, according to the bank, and while there were some currency gains, they were not enough to offset these losses.
The gold price per kg at mid-year was about CHF40,800, resulting in a valuation loss of CHF 1.6 billion. The SNB’s gold holdings were unchanged, but they suffered a valuation loss of CHF1.6 billion: “Although the dollar price per fine ounce rose compared to the end-year
value, the price per kilogram fell from CHF42,289 to CHF40,799 as a result of the weaker USD exchange rate,” the SNB notes.
UBS stabilization fund reduced
The SNB loan to the stabilization fund that was created in late 2008 to bail out the country’s largest bank, UBS, was reduced from CHF11.8b
($12.6b) to CHF8.0 billion ($9.4b), during the first six months. “The total risk decreased from almost CHF14b to around CHF10b, the SNB reports, with the fund showing a half-yearly profit of $1.334b, representing a contribution of CHF 697 million to the consolidated result.”
Reserves to be allocated at the end of the year
Switzerland’s reserves are 25 percent in dollars, 55 percent in euros, 3 percent in GB sterling, 10 percent in the Japanese yen, 4 percent in Canadian dollars, with 3 percent “other”. By law, the SNB must set aside provisions to “maintain the currency reserves at the level necessary
for monetary policy”; the allocation will be made towards the end of the year.
Source: Swiss National Bank, 16 June 2011 (click on image to view larger)
ZURICH, SWITZERLAND – Put the Swiss banking crisis in the past tense, with the Swiss National Bank’s new report on the state of Swiss banking showing that in 2010 the gross profit for the country’s 320 banks was CHF18.9 billion, a roughly 50 percent improvement over 2009.
The aggregate balance sheet for all Swiss banks in 2010 rose by 1.7% to CHF 2.71 billion.
The overall figures hide a significant difference, with 53 banks showing a loss, four more than in 2009. The loss was mainly due to a “substantial depreciation of tangible assets amounting to CHF 9.4 billion”, says the SNB.
The big banks played a key role in the improvement, says the SNB in a statement issued Thursday 16 June. The data “shows that this result was significantly influenced by the big banks, which reported improved trading income, higher extraordinary income and an increase in depreciation of tangible assets.”
Swiss franc’s appreciation reduced value of foreign balance sheet items
SNB profit, a tale of currency movements
Zurich, Switzerland (GenevaLunch) – A net profit of CHF1.9 billion for the first three months of 2011 at The Swiss National Bank was due largely to currency fluctuations, the central bank said Friday 29 April. The net result from foreign currency positions was CHF1.6 billion, while losses from Swiss franc holdings were CHF106 million.
Euro appreciation led to exchange rate gains
The bank says that the Swiss franc depreciated against European currencies from January to 31 March, ” leading to exchange rate gains, especially on euro holdings. A depreciation in the US dollar and the yen, however, meant that the overall exchange rate gain amounted to CHF 2.4 billion. A slight rise in interest rates depressed prices of interest-bearing instruments by CHF 2.9 billion. Interest income on these securities of CHF 1.4 billion and price gains on equity securities of CHF 0.6 billion were not sufficient to offset the fall in prices.”
Gold contributed little, UBS loan repayments reduce risk
This one is made of chocolate but real shoes cost more in March, as new models replaced February sale items
Zurich, Switzerland (GenevaLunch) – Swiss consumer prices rose 0.6 percent in March 2011, according to the latest CPI (consumer price index) figures released Wednesday 6 April by the Federal Statistics Office. Year-on-year inflation was 1.0 percent.
The annualized rate in February was 0.5 percent.
The main contributors to the rise in inflation were petrol prices, up 4.9 percent and new clothes and shoes hitting the stores after the sales, with an 8.5 percent increase in prices compared to February.
The Swiss franc continues to remain high against other major currencies, but according to Swiss National Bank (SNB) board member Jean-Pierre Danthine, interviewed by Basler-Zeitung shortly before the latest inflation figures were published, the Swiss economy is largely immune to the currency situation, with the very low interest rates providing domestic benefits. The European Central Bank will announce 7 April if it is raising interest rates and the SNB says it is closely watching international developments, one of the greatest risk factors for the Swiss economy.
Related stories: Reuters, preface to the 2010 Annual Report of the SNB, published 7 April 2011
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.”
Dollar weakens against the Swiss franc
The Swiss franc reached another historic high against the US dollar in trading Tuesday, 15 March, as the dollar slipped below CHF0.92.
The Japanese yen also traded close to historic highs as Japanese firms appear to be bringing finance back to Japan to help firms deal with the problems caused by the massive earthquake and tsunami.
The Swiss franc benefited from its traditional role as a safe have in times of uncertainty and from the sound economic performance of the Swiss economy.
Switzerland has low inflation, a current account surplus, a balanced budget and comparatively low national debt.
The Swiss National Bank announces its interest rate policy Thursday 17 March and analysts are expecting rates to be kept near zero.
SNB cash distribution will be concentrated in Bern and Zurich
Geneva, Switzerland (GenevaLunch) – The Swiss National Bank will close its Geneva money-distribution operation at the end of January 2012, the central bank announced Wednesday 2 March, to concentrate the service in Bern and Zurich. The SNB also works with 13 agencies operated by cantonal banks to ensure an adequate supply of coins and bills in Switzerland.
The volume in Geneva is not great enough for the system to operate efficiently, the SNB says.
Fifteen employees will be affected but the bank hopes to avoid redundancies through early retirement or internal re-assignment.
The SNB will continue to maintain a presence in Geneva with its delegate for regional economic relations.
Bern, Switzerland (GenevaLunch) – Switzerland’s financial system managers have set up a financial crisis unit: the federal finance ministry, the central bank and the bank supervisory body Finma have signed an MOU (memorandum of understanding) in line with a 2010 directive from the government in the wake of the global financial crisis.
The steering committee for the unit will meet at least once a year to create a set of crisis management tools and “as often as necessary” in the event of a crisis. The new committee will be relatively autonomous, with the head of the Federal Department of Finance responsible for deciding on the timing of informing the full seven-member ruling Federal Council of the need to take measures, but he or she must inform them immediately when “risk assessment reveals the likelihood of exceptional measures having to be taken by the authorities”.
Losses in future years could touch shareholder gov’ts budgets
The SNB has head offices in Bern, shown, and Zurich
Update 11:45 Zurich, Switzerland (GenevaLunch) – The Swiss National Bank (SNB) is likely to post a CHF21 billion loss for 2010 as the result of exchange rate losses of CHF26m, it announced Friday.
But the federal government and cantons will receive their expected share of profits and dividends so their planned budgets will not have to be cut.
The SNB loss was softened by a CHF6b gain in the value of gold holdings. The central bank in 2009 has a profit of CHF10b. The bank notes that “despite the reduced allocation to the provisions for currency reserves, the SNB’s capital base continues to be robust, also by comparison with other central banks.”
The bank builds long-term equity capital by allocating money every year to the provisions for currency reserves.”The events of the past year have highlighted the fact that an adequate capital cushion is paramount for monetary policy independence. The SNB will therefore continue to pursue its long-term strategy of increasing its equity capital on an annual basis by means of allocations to the provisions for currency reserves.”
