Under Jordan Swiss National Bank Returns to Being Boring

Swiss National Bank President Thomas Jordan says his best investment is the first drink he ever bought his wife.

Jordan, a bespectacled central-bank veteran, took the top job at the SNB in April after Philipp Hildebrand resigned. Since assuming the helm, Jordan has sought to return calm to the century-old institution after the furor sparked by a currency purchase of $504,000 by Hildebrand’s wife in August 2011, just three weeks before the central bank imposed a ceiling to weaken the franc.

Jordan made the quip about his wife’s drink at a Sept. 3 conference in Zurich when the controversy about the currency dealings of the Hildebrand family was fresh in the public’s mind. He was already responsible for keeping the franc capped at 1.20 per euro. The SNB probably will stick to that ceiling when the central bank announces results of its quarterly monetary policy assessment at 9:30 a.m. in Zurich tomorrow.

“After the turmoil of last January, when the central bank became the target of politicians, they must want to lower their profile,” said Alessandro Bee, an economist at Bank Sarasin in Zurich. “Mr. Hildebrand was more of the showman, and Mr. Jordan is more dry.”

Both Jordan and Hildebrand were born in the mountainous canton of Bern in 1963, and as youths both participated in water sports: Jordan played water polo, while Hildebrand swam, narrowly missing qualification for the 1984 Olympics.

Common Origins

From these common origins, their paths diverged, with Jordan joining the central bank in 1997 after leaving university. Hildebrand worked for a hedge fund in London and New York and two Swiss private banks before joining the central bank’s board in 2003. He took over as president in 2010.

Soft-spoken Jordan, 50, epitomizes his nation’s preference for discreet and consensus-oriented negotiations and an aversion to people who make a splash.

“In terms of communication, the central bank became more bland,” said Sanda Ionescu, a Geneva-based consultant who works for the cross-cultural communication company Communicaid. “Jordan is seen as reliable and trustworthy. He is much more typically Swiss than Hildebrand. The good old Swiss style seems to be the one it pays to stick to.”

Carney to Draghi

With the Jordan appointment, Switzerland returned to its habit of picking insiders. While Hildebrand joined the SNB’s three-member rate-setting board from private banking, his predecessor Jean-Pierre Roth spent decades ascending the rungs of the SNB, as did Hans Meyer who served as president from 1996 to 2000.

Both Bank of Canada chief Mark Carney and European Central Bank President Mario Draghi worked for Goldman Sachs Group Inc. before taking their central bank jobs, while U.S. Federal Reserve Chairman Ben Bernanke and Bank of England Governor Mervyn King joined from academia.

Even as Switzerland has escaped recession, Jordan says giving up the currency cap is still a long way off, according to remarks on Feb 27. The SNB has held its benchmark interest rate at zero since August 2011 and will maintain that rate at tomorrow’s meeting, according to all 22 economists in a Bloomberg News survey.

His speeches tend to stick to the same theme: The central bank will do its utmost to defend the cap on the franc, in place since September 2011, and is prepared to take further measures, should the growth and inflation outlook require it.

“Jordan keeps a lower profile,” Sarasin’s Bee said. “I think they’re attempting to take the personality out of the equation and put policy front and center.”

Hildebrand Crisis

The SNB emerged from the Hildebrand crisis with its international reputation intact. Hildebrand’s wife, Kashya, defended the purchase, saying she bought dollars because the currency was “ridiculously cheap.”

While the affair dominated newspaper headlines, it didn’t rattle the currency market. Save for a short breach in April, the cap on the franc has stuck. The policy has come with a price as the SNB spent 188 billion francs in 2012 to enforce the cap, up 10-fold from 2011, and its reserves have ballooned to almost three-quarters of annual gross domestic product.

The SNB will keep the ceiling into 2015, said Reto Huenerwadel, an economist at UBS in Zurich. “Next possible steps would be a surcharge on franc sight deposits held at the SNB. This, however, is a very, very distant scenario at the current trajectory.”

Euro Region

Since Draghi disclosed details in September of the ECB’s bond-buying efforts to stabilize the euro region, pressure on the franc’s cap has diminished, though last month’s Italian elections highlighted that threat. The franc reacted to the Italian vote by rising to a six-week high against the euro.

The central bank’s strategy proved effective, partly because of good fortune, said Martin Gueth, an economist at LBBW in Stuttgart. “They’ve been lucky in that the crisis in the euro area became less acute and what happens there is out of their hands,” he said in a telephone interview.

The franc has depreciated 2 percent since the start of this year as the euro-area crisis eased. It traded at 1.23213 at 11:54 a.m. in Zurich, little changed on the day.

Jordan, who regularly arrives at public events without much entourage and keeps his question-and-answer sessions short, received his doctorate from the University of Bern, before spending three years at Harvard, studying under professor Benjamin Friedman. Jordan’s wife, whom he met at school, teaches languages. They have two sons.

Confrontation Avoided

That contrasts with Hildebrand, 49, who attended Oxford University, and now serves as vice chairman of BlackRock Inc. in London.

“With his more Anglo-Saxon style, Mr. Hildebrand rubbed members of the political elite the wrong way,” Bee said, pointing to Hildebrand’s tendency to speak his mind in public. Swiss politicians often avoid direct confrontation in parliament and the country has been ruled by coalitions of the biggest parties since 1959.

Hildebrand was never publicly accused by the government of wrongdoing. He stepped down on Jan. 9, 2012, vowing that he had not known about his wife’s purchase.

Christoph Blocher, a former justice minister and member of the anti-immigrant Swiss People’s Party, SVP, was Hildebrand’s long-running adversary who repeatedly criticized his running of the central bank, especially after the record loss in 2010 due to interventions to weaken the franc. Blocher then helped pass Hildebrand’s private financial transactions to the government, bringing about his resignation.

Proposal Rejected

Swiss lawmakers in March 2012 rejected an SVP proposal to curb the central bank’s ability to intervene in currency markets and Blocher has grown silent in his criticisms since Jordan was appointed president in April.

“The Swiss political establishment, including the SVP, has great confidence in Thomas Jordan,” Ernst Baltensperger, professor emeritus at the University of Bern, said in an e-mail. “This is reflected in the general support the SNB currently receives,” said Baltensperger, who served as Jordan’s PhD supervisor. “Of course, the fact that the exchange rate situation has become a bit less tense has also helped” Jordan and the bank, he said.