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Nightmare isn't over for Hildebrand

SNB's president was cleared of any wrongdoing and retained his job, but he is now answering to parliament over the controversial currency transaction

The Swiss National Bank's (SNB) president Philipp Hildebrand was cleared of any "insider-trading" wrongdoing and has kept his job – despite his family executing some questionable currency purchases just before the Swiss franc was devalued - but it looks like his personal nightmare is far from over, having reportedly to give evidence as politicians further investigate the case.

According to Business Week, which cited Switzerland's Der Sonntag:

Swiss National Bank president Philipp Hildebrand will today answer lawmaker questions in Bern as he seeks to end a discussion over controversial currency purchases by his wife.

Hildebrand will submit emails to parliament today that show his wife acted alone in making foreign currency trades that led to calls for him to resign, Der Sonntag reported yesterday, without saying where it got the information. SNB spokeswoman Silvia Oppliger declined to comment.

“We need tougher rules on SNB’s board members’ transactions, and spouses should be restricted as well,” said Christophe Darbellay, head of the Christian Democratic Party and president of the parliament panel that will question Hildebrand from 4pm in Bern today. He declined to say whether Hildebrand should stay in office.

On Sunday, the SNB stepped up to Hildebrand's declaration to take steps to "ensure that transparency over compliance with SNB regulations is guaranteed fully and at all times".

In a statement, the SNB said it would tighten controls, and revise regulations and directives. In response to the public outcry over these set of transactions:

[Excerpt from Hildebrand press conference speech]

In April and May, and subsequently in October, we purchased euros for a total value of
around CHF114,000 to buy paintings and a boat; the regulations classify these
transactions as the purchase of non-financial assets, and as such they are not subject to
any restriction.

In the critical period prior to the decision to impose a minimum exchange rate against the
euro, there were two foreign exchange transactions on August 15, 2011, in which around
USD504,477 was purchased, costing CHF400,000 in total. The bank statements show two
transactions at the same exchange rate (USD484,477.24 against CHF384,142, and
USD20,000 against CHF15,858 – a total of CHF400,000), because I opened a subaccount for
our daughter; USD20,000 was transferred to this account on my instructions.

This corresponds to around one-third of the sub-account’s value at that time. The large
transaction was requested by my wife – who has always had power of attorney for my
accounts – on August 15, 2011 at 1.20pm, by means of an email to our account manager
at Bank Sarasin, and without my knowledge. As you can see from the PwC report, she
wanted to raise the share of US dollars in our financial assets (liquid funds) to around
50%. The account manager confirmed the request at 3.10pm on the same day, and sent
me a copy. The next morning, I read the bank confirmations and at 7.36am informed our
account manager that, in future, he was not to carry out any foreign exchange
transactions without first obtaining an instruction or confirmation from me.

With hindsight, if I reproach myself for anything, it is that I allowed the transaction requested by my wife,
who is not informed of monetary policy decisions, to stand rather than acting more
decisively and ordering that all the foreign currency transactions of August 15, 2011, be


Yesterday, the SNB said:

At its meeting of January 7, 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

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

Furthermore, the Bank Council has decided that all bank transactions effected by members
of the Enlarged Governing Board between January 1, 2009, and December 31, 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 CHF20,000. The Audit Committee of the Bank Council will be
informed periodically of such instances.

However, this does not seem to be enough to quell concerns and restore the trust market participants had for the central bank.

The Hildebrands' case has been fraught with loopholes and concerns, which has left many analysts and market participants angered.

Again, while the transactions were not illegal, experts have remarked that “Kashya Hildebrand’s dollar trade isn’t problematic, but from the point of view of morality, experienced economic experts like the Hildebrands should know that a spouse’s trades are not without problems”.

Furthermore, Euromoney highlighted the shortfalls, albeit somewhat limited, in FX markets, which means one cannot be prosecuted for "insider trading".

- Euromoney Skew Blog

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