March 28, 2024

Swiss Bank Chief Vows Not to Resign Over Currency Trades

“I am not aware of any legal transgressions,” Mr. Hildebrand said at a news conference in Zurich. “But I understand that the public also poses the moral question.”

The 48-year-old head of the Swiss National Bank, who played a high-profile role in formulation of new global standards designed to limit risky behavior by bankers, was by turns contrite and angry during the one-hour appearance, which was broadcast on the Internet.

While expressing regrets, Mr. Hildebrand portrayed the accusation of insider trading as the work of his enemies on the Swiss political right, and said he was considering taking legal action against those who used information stolen from a personal account at Bank Sarasin, a Swiss private bank.

“The personal attacks against me have reached the point where I had to defend myself,” Mr. Hildebrand said.

An information technology worker at Bank Sarasin faces a criminal investigation for allegedly giving the information to the Swiss People’s Party, whose most visible leader, Christoph Blocher, has been a bitter critic of Mr. Hildebrand.

Appearing on a Swiss television program Thursday, Mr. Blocher confirmed that he had passed on information about the transactions and called Mr. Hildebrand “no longer tolerable.”

But Mr. Hildebrand also faces a storm of criticism across the political spectrum, with members of Parliament and commentators questioning whether he has damaged the credibility of the Swiss National Bank and Switzerland’s image abroad. Mr. Hildebrand is vice president of the Financial Stability Board, a group of central bankers and regulators that plays a leading role in recommending bank regulations to the leaders of the Group of 20 nations.

Mr. Hildebrand vowed to “continue to apply all of my energy to my job as president” of the Swiss central bank.

During the news conference, Mr. Hildebrand denied a key assertion by Weltwoche, a right-leaning Swiss magazine that first reported many details of the accusations. The publication said it had evidence that Mr. Hildebrand, and not his wife, had personally made a large investment in dollars just days before the Swiss National Bank stepped up its intervention in currency markets. The central bank was then engaged in an intense effort to stem the rise of the franc and protect Swiss exporters.

Mr. Hildebrand said that his wife, Kashya Hildebrand, had legal power to use the account and bought dollars because she considered them very cheap. He described her as an economist and “strong personality” who takes a keen interest in finance.

When he learned of the transaction the next morning, Mr. Hildebrand said, he immediately called his adviser at Bank Sarasin and told him not to make any more trades without his approval, and reported the transaction to S.N.B. compliance officials.

Mr. Hildebrand said he now regretted that he did not undo the transaction. Auditors from PricewaterhouseCoopers, hired by the council that oversees the Swiss National Bank, agreed with Mr. Hildebrand’s version of events.

But Mr. Hildebrand also said the case showed the need for more disclosure by top officials in the central bank. In the future, he said, he and other members of the S.N.B. directorate should make public all transactions worth more than 20,000 Swiss francs, or $21,000, and get clearance from the bank’s compliance department.

Mr. Hildebrand said he had donated 75,000 francs to an organization that promotes preservation of Swiss mountain regions. That is the sum that Weltwoche, the magazine, said that Mr. Hildebrand earned on the trades.

But it is unclear how much profit Mr. Hildebrand actually made from the trades.

In August, Mrs. Hildebrand spent 400,000 francs to buy $504,000, the auditors said, two days before the S.N.B. stepped up its intervention in currency markets.

In October, Mr. Hildebrand sold about the same amount of dollars at a more favorable exchange rate, earning about 64,000 francs.

But in March, after the sale of a vacation home, Mr. Hildebrand had purchased nearly $1.2 million when the exchange rate was much less favorable. So at least on paper that investment was a money loser.

Any profit would not be a large sum for the Hildebrands, whose personal wealth was evident Thursday in the size of their real estate assets. One reason that Mr. Hildebrand bought dollars in March, he said, was that the family’s Alpine vacation home had just sold for 3.3 million francs and he wanted to diversify his currency holdings.

The accusations put huge political pressure on Mr. Hildebrand, but it appears unlikely that he will face criminal charges. Switzerland’s insider trading law does not apply to currency transactions, said Andreas Brunner, head of a prosecutor’s unit in Zurich that focuses on economic crimes.

Mr. Brunner’s office said Thursday that it would pursue a criminal investigation of a 39-year-old former employee of Bank Sarasin for possible violations of the country’s bank secrecy law. The man, who was not identified, is suspected of leaking records of Mr. Hildebrand’s currency transactions.

The employee was able to call up Mr. Hildebrand’s records on a bank computer but not print them out. Mr. Hildebrand asserted that the employee used a mobile phone or digital camera to photograph the computer screen.

Bank Sarasin said Tuesday that it had fired the employee, who had turned himself in to the police in Zurich. The charges carry a maximum sentence of three years in prison.

Article source: http://feeds.nytimes.com/click.phdo?i=02189e1f5899f477c8850d4dcf952204

Swiss Central Bank Chief Faces Accusations of Improper Currency Trades

FRANKFURT — Philipp M. Hildebrand, chairman of Switzerland’s central bank and a key architect of tougher global banking regulations, came under intense pressure Wednesday after a Swiss publication reported that he profited from currency trades made before and after he oversaw steps to prevent the Swiss franc from becoming too strong.

The report by Weltwoche, a weekly magazine seen as having ties to the rightist Swiss People’s Party, reported that in October Mr. Hildebrand made 75,000 francs, or $79,600, from the dollar trades. He had acquired dollars before the Swiss National Bank, the central bank, announced measures in September to check the rise of the franc and protect Swiss exporters, the magazine reported. It cited copies of statements provided by an employee of a private bank where Mr. Hildebrand had an account.

Mr. Hildebrand did not immediately respond in detail to the report, but planned to make a statement Thursday. Late last month the council that oversees the central bank said it had examined “rumors” about transactions made by Mr. Hildebrand or members of his family and found no wrongdoing. A report prepared by PricewaterhouseCoopers, released by the S.N.B. Wednesday, said the transactions — amounting to more than $2 million — were made in connection with such family financial transactions as the purchase of real estate. The firm found no violations of central bank rules.

The accusations came as a shock in Switzerland and in central banking circles worldwide. Mr. Hildebrand is a familiar and respected figure in his home country, though some of his policy moves have drawn intense criticism.

Internationally, Mr. Hildebrand, who spent part of his career at a New York hedge fund, is known for his work drafting regulations, known as Basel III, that would oblige banks worldwide to limit their use of leverage to strengthen risk management.

The disclosure of the transactions immediately took on political overtones because of the involvement of the Swiss People’s Party in bringing the matter to light. In the past the party, which campaigns on a platform of limiting immigration and keeping Switzerland out of the European Union, has been among Mr. Hildebrand’s most vocal critics.

“There have been disputes about monetary policy, but so far no one has questioned his integrity,” said Daniel Kübler, a professor of political science at the University of Zurich.

Noting that Mr. Hildebrand had pushed for more financial disclosure by top officials of the central bank, Mr. Kübler said he found it difficult to believe that the accusations were true. But he added, “If it is confirmed then he must resign.”

Accountants from PricewaterhouseCoopers who examined records of the transactions said that some were profitable for Mr. Hildebrand but others lost money. The report did not calculate the total profit or loss, but its findings raise the question of why Mr. Hildebrand, who is wealthy, would risk his reputation for relatively little return.

Mr. Hildebrand has made enemies at home and abroad by pushing to impose rules on the country’s two biggest banks, UBS and Credit Suisse, that were tougher than those in other countries. He has also annoyed his former banker colleagues with his criticism of banker compensation and his advocacy of regulations designed to limit bank risk and prevent future financial crises. The rules have been endorsed by leaders of the Group of 20 largest economies.

In Switzerland, one of Mr. Hildebrand’s most vocal antagonists has been Christoph Blocher, a businessman who is the best-known figure in the Swiss People’s Party. In the past Mr. Blocher has accused the Swiss National Bank of squandering the country’s wealth with costly currency interventions and demanded that Mr. Hildebrand resign.

The criticism has been muted since the S.N.B. announced in September that it would set a limit on the currency of 1.20 francs to the euro. The policy has been successful in keeping the franc, favored by investors as a haven from global financial turmoil, from rising to levels that would be ruinous for Swiss export companies.

Bank Sarasin, an institution in Basel, Switzerland, where Mr. Hildebrand had an account, said Tuesday that one of its employees leaked information about the currency transactions to a lawyer close to the People’s Party. The employee, who was not identified, later met with Mr. Blocher, the bank said. The employee has been fired and has turned himself in to the police for violating bank secrecy laws, Bank Sarasin said.

The report by PricewaterhouseCoopers found that one transaction was made without Mr. Hildebrand’s knowledge by his wife, Kashya, the owner of an art gallery in Zurich.

Article source: http://www.nytimes.com/2012/01/05/business/global/05iht-snb05.html?partner=rss&emc=rss