Swiss Reject Proposal Aimed at Curbing SNB Powers to Intervene

Swiss Reject Proposal Aimed at Curbing SNB Powers
An employee handles Swiss francs and euro notes on the counter of a currency exchange in this arranged photograph in Effretikon, near Zurich. Photographer: Gianluca Colla/Bloomberg

Swiss lower-house lawmakers rejected a proposal to curb the central bank’s ability to intervene in currency markets, with some calling on policy makers to raise the franc ceiling.

Lawmakers in Bern rejected the proposal initiated by the Swiss People’s Party to toughen supervision over currency purchases by 129 votes to 52. They also voted against a motion to force the central bank to keep a buffer of equity and currency reserves of at least 40 percent of overall assets, while backing a proposal demanding the government examine ways to weaken the Swiss currency.

The Swiss National Bank imposed a franc ceiling of 1.20 versus the euro in September to protect exports and fight deflation threats. The economy has since shown increasing signs of stabilization and Swiss President Eveline Widmer-Schlumpf said today it’s important that the central bank maintains its ability to take “independent decisions in turbulent markets.”

“The franc exchange rate to the euro needs to reach 1.40, or even higher,” said Susanne Leutenegger Oberholzer, a lawmaker from the Social Democratic Party. “It’s not acceptable if the central bank continues to tolerate an exchange rate of 1.20. You all know the consequences -- we’re losing jobs, we’re facing a massive growth loss over time, tourism is massively suffering, exports are increasingly under pressure.”

Currency Purchases

The SNB was put under pressure after unprecedented currency purchases to weaken the franc in the 15 months through June 2010 sparked a record loss. The Zurich-based central bank said on March 8 it had a profit of 13.5 billion francs ($14.6 billion) in 2011, partly as the franc ceiling helped stabilize currency holdings.

The SNB, led by interim chairman Thomas Jordan, will keep its cap at 1.20 per euro tomorrow, according to all 14 economists in a Bloomberg News survey. That level hasn’t been breached since the central bank imposed the measure six months ago. It will publish its decision at 9:30 a.m. in Zurich.

The ceiling “helped limit the damage,” said Ada Marra, a lawmaker from the Social Democrats. “It’s incomprehensible why one is waiting to lift the cap. The crisis is not far.”

Swiss lawmakers also debated the resignation of Philipp Hildebrand in January over a purchase of $504,000 by his wife in mid-August, three weeks before policy makers imposed the franc ceiling. People’s Party deputy leader Christoph Blocher, who helped pass leaked details of Hildebrand’s account to authorities last year, said during the debate that SNB policy makers shouldn’t be allowed to purchase or sell currencies.

Fulvio Pelli, head of the Liberal Party, said that Hildebrand’s resignation was an “intelligent decision.”

“Hildebrand did an excellent job,” Widmer-Schlumpf said. He was “probably a bit too strong for some political forces and he couldn’t be influenced enough. Fortunately for our country we have a strong” SNB.

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