ZURICH (Reuters) - The Swiss National Bank (SNB) said on Saturday it would review its internal rules governing own-transactions made by board members as it seeks to clean up its image following a trading scandal centered on its chief.
The SNB has come under pressure to shake up its internal ethics codes after an employee of Swiss bank Sarasin leaked information that the wife of SNB chief Philipp Hildebrand had bought dollars weeks before he imposed a cap on the Swiss franc.
“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 SNB said in a statement.
The central bank’s credibility is crucial to its ability to defend the cap of 1.20 francs per euro at a time when heightened uncertainty in the euro zone could encourage investors to stash their funds in relatively safe Switzerland and again boost the value of the franc.
The SNB has been criticized for lax transparency after initially failing to publish its internal ethic codes, unlike other central banks.
Hildebrand told a news conference he only learned of the trade, which yielded a sizeable profit, a day after his wife’s transaction and rebuffed calls by Swiss media and its largest political party to resign. He also vowed to tighten the rules for central bank employees and boost transparency.
The Swiss cabinet has said it has full confidence in Hildebrand and an external investigation found the trades did not breach internal ethics rules, which forbid currency trades within a six-month period.
But the right-wing Swiss People’s Party, vocal critics of Hildebrand and the large losses run-up through SNB interventions on his watch, have called it “unacceptable” that the head of the national bank can trade foreign currency.
Peter Kunz, professor of economic law at the University of Berne, said in an interview with a Swiss radio station on Saturday that the SNB’s regulations were not clearly written and the bank council now needed to think about an overhaul of their content.
“Currency exchange transactions are not even mentioned. The bank council has to think about the content now, are they wanting to ban this, are they wanting to limit this?” he said.
The bank council said it would enlist external specialists to help comprehensively review its rules governing what own-transactions involving financial instruments members of its enlarged six member governing board can undertake.
In addition, the bank council said it had decided to get external auditors, preferably KPMG or Ernst & Young, to review all bank transactions carried out by members of the enlarged governing board between January 1, 2009 and December 31, 2011.
Until the regulations have been revised, members of the governing board as well as staff members with access to privileged information will have to get approval from the bank’s chief compliance officer for foreign currency transactions exceeding 20,000 Swiss francs, it said.
Reporting by Caroline Copley; editing by Andrew Roche