Credi Corp Securities Headlines: Swiss Banker Says He Won’t Resign
ZURICH—Swiss National Bank President Philipp Hildebrand sought to defuse a controversy over currency transactions he and his wife made last year, saying he broke no rules and wouldn’t resign but acknowledging the incident had raised ethical questions.
In his first public remarks since concern about the transactions surfaced in late December, Mr. Hildebrand disclosed proposals to increase transparency in financial dealings by top SNB officials. The questions center on a currency transaction Mr. Hildebrand’s wife, Kashya, made Aug. 15, just before the SNB’s September move to weaken the Swiss currency.
Despite Mr. Hildebrand’s remarks, the controversy continued late Thursday. Christoph Blocher, vice president of the Swiss People’s Party and a vocal critic of Mr. Hildebrand, called for a parliamentary investigation into the trades.
Mr. Hildebrand has battled critics for much of his two-year tenure, both for enacting some of the toughest bank regulations in the world and for authorizing large currency interventions in a largely unsuccessful effort to control the rise of the franc in 2010.
That led to 19 billion francs in losses for the SNB in 2010.
On Wednesday, the Swiss central bank offered details of currency transactions made by Mr. Hildebrand and his wife in an attempt to clear up questions as to whether the couple profited when the SNB intervened aggressively last summer to rein in a rise in the Swiss franc.
The controversy has intensified in recent weeks, after the SNB released a report Dec. 23 exonerating the couple but providing no details of its findings. Some observers also criticized the central bank for not disclosing its ethical guidelines, in contrast to the European Central Bank and the U.S. Federal Reserve.
By Thursday, there was a flurry of calls in Switzerland for Mr. Hildebrand’s resignation. On Thursday, he said that, “as long as I have the confidence of the government and the bank council, stepping down is not an issue for me.”
“I have always conducted myself not only according to the regulations, but also correctly,” he added. “I am not aware of any legal breaches, but I understand the public has ethical questions.”
This week, the SNB disclosed Mr. Hildebrand used Swiss francs to buy $1.17 million last March, using the proceeds from the 2010 sale of a family property.
In October, he sold $516,000 in order to buy another property.
Meanwhile, Ms. Hildebrand, who formerly worked at a New York hedge fund and now runs a Zurich art gallery, bought $504,000 Aug. 15, around the time the dollar hit a record low against the franc and just two days before the SNB flooded the market with liquidity in an effort to weaken the Swiss currency. On Sept. 6, the SNB said it wouldn’t let the euro fall below 1.20 francs, a bold move that sent the dollar soaring 17% by early October.
Ms. Hildebrand, who told Swiss television Tuesday she bought the dollars because they were “ridiculously cheap,” later sold the dollars on an undisclosed date.
Mr. Hildebrand said he only learned of the purchase the day after it was made, but on Thursday said he wasn’t “totally surprised,” because Ms. Hildebrand had “talked about how low the dollar is and that we should buy more dollars….What I blame myself for is not either reversing the transaction or not telling her not to discuss this.”
Mr. Hildebrand acknowledged the transaction yielded a profit but offered no further details Thursday. However, he said he has donated 75,000 francs (worth about $80,000 Thursday) to a Swiss charity.
The SNB asked its auditors, PricewaterhouseCoopers, to conduct a probe into the transactions in December and released the details this week. PWC found no improprieties in the dealings, saying Mr. Hildebrand’s own currency dealings were tied to personal real-estate transactions, which is permitted under SNB ethics rules.
PWC found emails demonstrating Mr. Hildebrand wasn’t aware of his wife’s dollar purchase until after the fact.
On Thursday, Mr. Hildebrand reiterated that stance, refuting a report in the Swiss press citing unnamed sources alleging that he—and not his wife—had ordered the August transaction. He also said his wife had no advance knowledge of the SNB policy moves that came in late August and early September.
A separate Swiss government inquiry also exonerated the Hildebrands.
While SNB ethics rules are roughly in line with those at the European Central Bank, Mr. Hildebrand said he will propose new, tighter measures. For instance, transactions by SNB board members worth more than 20,000 francs would require approval from the bank’s governing council.
Mr. Hildebrand, who was picked for the top spot at the bank in part because of his experience in financial markets and the private sector, had begun to gain greater favor among politicians and industry leaders in recent months, boosted by the success of the SNB’s September move to contain the rise in the franc. The weakening of the franc has helped the economy, which has slowed in the past year due to the currency’s strength.
Foreign-exchange strategists said Thursday that Mr. Hildebrand’s troubles so far aren’t likely to affect trading in the franc, given the SNB’s strong commitment to keeping the strength of the currency under control.
While the Swiss central bank has a relatively small balance sheet, it enjoys outsize influence internationally, in part because of Switzerland’s role as the world’s largest offshore financial center.
In turn, Mr. Hildebrand enjoys particular prestige and influence among the world’s top central bankers, boasting close relationships with his counterparts in the U.S. and Europe.
Meanwhile Thursday, Zurich’s state prosecutor said it has opened a criminal investigation into a former Bank Sarasin & Cie AG employee who is alleged to have passed on Hildebrand family currency-transaction details to the Swiss People’s Party, which has been highly critical of the central banker. The leak, which would be a breach of Swiss banking regulations, paved the way for the controversy last December.
Sarasin said earlier this week the employee has been fired and had turned himself in to Zurich police Jan. 1. The Zurich state prosecutor opened a criminal probe into the employee’s actions Thursday. A Sarasin spokesman said the bank had no further comment. The SNB said the employee gave the information to Herman Lei, a lawyer associated with the Swiss People’s Party. Mr. Lei couldn’t be reached for comment.
Separately, Mr. Blocher, of the Swiss People’s Party, told Swiss television Thursday evening that “several lawyers” had informed him of the currency trades in early December, after which he informed the Federal Council, the cabinet of Switzerland’s executive branch.
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