Swiss central bank caves over chief's dollar deals

AP News
Posted: Jan 04, 2012 1:55 PM
Swiss central bank caves over chief's dollar deals

After days of stonewalling, the Swiss National Bank gave in Wednesday to demands it shed light on currency trades from its chief's personal account that netted fat profits as he led efforts to lower the Swiss franc's value.

The Swiss government, meanwhile, reiterated its support for bank chief Philipp Hildebrand amid growing disquiet over the possibility that the private dollar deals unfairly earned his family tens of thousands of francs (dollars).

The Swiss National Bank decided to publish a report by external auditors PricewaterhouseCoopers and release its previously secret guidelines for senior officials. The move came only hours after the Swiss political weekly Weltwoche claimed that Hildebrand had personally authorized the currency deals previously thought to have been conducted by his wife.

"The report by PWC shows that recent reports in certain media about the transactions of the Hildebrand family are partly incorrect and contain no information that wasn't already known to the controlling authorities," the central bank said in a statement.

Like most central banks, the SNB forbids senior officials from engaging in personal trading where they might profit from insider knowledge about an upcoming monetary policy decision.

A key question is whether the trades were done by the bank chief or his wife Kashya, a former currency trader, and whether Hildebrand knew of them.

The Zurich-based Weltwoche weekly said it had obtained bank statements showing that Hildebrand himself bought large amounts of U.S. dollars before selling them for profit.

"We have all the bank statements showing the relevant transactions, plus a verbal assurance from a bank employee confirming that it was Hildebrand personally, not his wife, who ordered the transactions," Weltwoche's Deputy Editor-in-Chief Philipp Gut told The Associated Press in a telephone interview.

Gut declined to identify the bank employee, but said he was a client adviser at Bank Sarasin. The Basel-based private bank said it has fired an IT support employee who leaked confidential information about "currency transactions by the family" of Hildebrand.

The audit report released by the bank Wednesday cites emails indicating it was Kashya who used 400,000 francs to purchase 504,000 U.S. dollars on Aug. 15 _ only informing her husband a day after the transaction occurred. The audit report doesn't say whether she was aware of the SNB's currency plans, nor whether it was Hildebrand or his wife who, less than two months later, sold $516,000 for 475,000 Swiss francs.

The trade seemed to earn the Hildebrands almost 75,000 Swiss francs ($83,000) because between the purchase and the sale of U.S. currency, the Swiss National Bank had increased franc liquidity and set the minimum exchange rate of the euro at 1.20 Swiss francs. The two actions helped to sharply raise the value of major currencies like the dollar against the franc.

Auditors concluded that the cheap purchase of U.S. dollars two days before the SNB's liquidity decision Aug. 17 was "delicate," but since Hildebrand had declared the transaction a day earlier he hadn't breached any rules.

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On the sale of U.S. dollars, the auditors concluded it was part of a property deal that began in March. They decided that because Hildebrand had held almost $1.2 million from the deal for over six months, he also didn't breach SNB rules with the Oct. 4 dollar sale and in fact lost money in the exchange.

The Swiss government, meanwhile, issued a statement Wednesday saying it had discussed the affair with Hildebrand at a Cabinet meeting Dec. 23.

"The Federal Council sees no reasons to question the outcome of the audit. It has pronounced its support for Mr. Hildebrand," the government said.

Media commentators and lawmakers had urged greater transparency from the SNB and from the 48-year-old Hildebrand, whose unblemished image is considered crucial to the credibility of Switzerland's small but powerful central bank. Hildebrand has scheduled a news conference for Thursday.

Weltwoche, which published the latest allegations against Hildebrand, is close to the nationalist Swiss People's Party and its prominent billionaire backer, former Justice Minister Christoph Blocher.

Bank Sarasin said in a statement late Tuesday the fired IT support specialist passed details of the Hildebrands' account to a People's Party lawyer, who then arranged a meeting with Blocher.

Blocher, who has repeatedly criticized Hildebrand's management of the central bank, said through his spokesman he had no plans to comment on the case.