Switzerland’s central bank president, Philipp Hildebrand, has been facing criticism for his involvement in a deal where his family profited in CHF USD currency swaps.
Although the president reported transactions the dynamics are unclear whether he acted unprofessionally. A detailed report was conducted by Price Waterhouse Coopers after the matter was putting pressure on the central bank.
The main issue was that Hilderbrands family earned 75,000 Swiss francs ($83,000) from dollar currency swaps when the Swiss central bank was looking to depreciate the franc.
Earlier reports stated that the president had personally authorised the transaction however the PWC report clarifies and provides clearer information on the exact nature of the dealings.
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The PWC report cites emails indicating that Hildebrand learned of his wife’s decision to purchase 504,000 U.S. dollars for 400,000 francs on Aug. 16 — a day after the transaction occurred. The audit report doesn’t say whether it was Hildebrand or his wife who, less than two months later, sold $516,000 for 475,000 Swiss francs.
However, between the purchase and the sale of U.S. currency, the Swiss National Bank increased franc liquidity and set the minimum exchange rate of the euro at 1.20 francs. The two actions helped to sharply raise the value of major currencies against the franc.
The franc has been appreciating since the credit crisis and more so since the Eurozone crisis. The safe haven currency appreciated by 13% over the Euro in 2010 and in the first half of 2011 it gained another 11%. The franc is regarded as a reserve currency as the Eurozone is getting closer to break up.
The incident could cause misery for Switzerland’s economy as a financial markets hub, since the new Forex banking laws no new brokers have entered the market.