Hildebrand Mail Shows Clash of Accounts Over Purchase With Sarasin Adviser
Former Swiss National Bank President Philipp Hildebrand
Gianluca Colla/Bloomberg
Former president of the Swiss National Bank Philipp Hildebrand.
Former president of the Swiss National Bank Philipp Hildebrand. Photographer: Gianluca Colla/Bloomberg
Jan. 9 (Bloomberg) -- Philipp Hildebrand resigned as head of the Swiss central bank after a currency transaction by his wife last year dented the credibility of the franc’s chief guardian. Betty Liu and Sara Eisen report on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Philipp Hildebrand discussed buying dollars with his adviser at Bank Sarasin (BSAN) on the day his wife made a currency trade that later led to his resignation as head of the Swiss National Bank, documents show. An e-mail by Hildebrand disputes that account.
Hildebrand told Felix Scheuber, a relationship manager a Sarasin, he was considering “increasing his USD exposure,” though he would “leave it up to his wife Kashya to so decide,” according to a document titled “Client Contact Report,” dated Aug. 15, 2011.
Later that day, Scheuber met with Kashya Hildebrand at her Zurich art gallery, where she was “very keen” to buy dollars, Scheuber’s report shows. Within hours, she sent an e-mail instructing him to buy $504,000 for the couple’s joint account.
Last week, the 48-year-old former hedge fund manager vowed to stay on as the country’s central bank head, saying he had e- mails that proved Kashya Hildebrand acted independently. “My word is my bond,” he said yesterday in his resignation speech in Bern, telling journalists that his wife was solely responsible for the dollar trade.
The transaction went through three weeks before the Swiss National Bank (SNBN) limited the franc’s exchange rate in its biggest policy intervention in three decades.
The e-mails, posted yesterday on the SNB’s website, offer two conflicting stories and show why Hildebrand couldn’t provide the definitive record he needed to keep his job.
‘Never Discussed’
In an e-mail to his wife and the client adviser at 7:36 a.m. on Aug. 16, the day after the trade confirmation, Hildebrand disputed Scheuber’s account, saying he was “surprised” at the “reference to a dollar transaction in your e-mail. We never discussed any dollar purchases yesterday.”
In a reply at 8 a.m., Scheuber went back to the previous day’s discussion. “I also remember you saying in our yesterday’s conversation that if Kashya wants to increase the USD exposure then it is fine with you,” Scheuber wrote.
In the e-mail on Aug. 16, Hildebrand told Scheuber that he wouldn’t authorize future transactions of that type. For “compliance reasons, you are not authorized to execute any currency transactions unless the order comes from me or I confirm it,” he wrote. “I need to know and sign off on any trades that Kashya might instruct you on,” he said, while also informing the SNB’s legal department of the transaction.
“PS: Kashya: sorry about that but currencies really are a special case here,” he wrote.
‘Low Prices’
Benedikt Gratzl, a spokesman for Basel-based Sarasin, told Bloomberg News that the documents are “accurate,” while declining to comment further.
The Hildebrands’ account transactions opened a debate in Switzerland about how central bankers’ finances should be managed. That topic was already under discussion when Philipp Hildebrand spoke with Scheuber on Aug. 15.
That day, they talked about how the SNB chief could “benefit from the current low prices,” according to Scheuber’s report. Hildebrand told his adviser to buy shares in Novartis AG (NOVN) and Roche AG, Switzerland’s biggest pharmaceutical companies, and Weatherford International Ltd. (WFT), a Swiss-based oil services firm, for a total of 75,000 Swiss francs.
They then questioned whether Hildebrand should hand over management of his portfolio to Sarasin. Hildebrand opted to retain control.
“There is still no desire to implement a discretionary managed portfolio,” Scheuber recorded.
Blind Trusts
At a Jan. 5 press conference, Hildebrand defended that decision, saying a portfolio manager’s unsupervised trades could still risk harming a central banker’s reputation. An option would be to place bank governors’ interests in a blind trust, where the owner has no knowledge about the investment decisions and just sees the returns.
For Hildebrand, that argument became obsolete when he resigned four days later. By then, Novartis stock had gained 24 percent since Aug. 15, while Roche had increased 27 percent. Weatherford gained 6.1 percent.
“I’ve come to the conclusion that it is impossible for me to provide final, definitive proof that my wife carried out the transactions without my knowledge,” Hildebrand said.
To contact the reporter on this story: Leigh Baldwin in Zurich at lbaldwin3@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
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