Swiss Central Bank Driven by Reforms after Saving Credit Suisse

Credit Suisse in London’s Canary Wharf financial district, in London, England, Thursday (16/3/2023)., ZURICH — The Swiss National Bank (SNB) is encouraged to make an overhaul in its governance. A wave of critics said too much power lay in the hands of SNB President Thomas Jordan and more transparency was needed.

The SNB played a major role in saving Credit Suisse. The action was state sponsored by providing 250 billion Swiss francs or 280 billion US dollars of liquidity to ease its takeover by UBS.

On the broader economic impact, his monetary policies have seen him build a balance sheet of nearly 900 billion Swiss francs, equivalent to 113 percent of Swiss economic output. All of which raises concerns about the concentration of power within Jordan’s three-person SNB governing board.

The central bank’s policy-making team is considered too small. Also less able to maintain a high level of discretion over its decision-making process.

Jordan, who has chaired the board since 2012, has cemented his authority at the central bank during that period. He has turned the currency market upside down by removing the Swiss franc peg. It also gave birth to the world’s lowest interest rates before joining others in a tightening policy due to inflationary pressures.

Governance concerns have taken center stage with the search for a new member to replace Andrea Maechler, the first woman to serve on the SNB’s governing board. Her term ends at the end of June and the market is calling for her to be replaced by an independent female candidate.

“With the current composition of the Swiss National Bank’s governing board, I fear that there is a strong concentration of power in the hands of a few and the role of chairman is too strong,” left-leaning Social Democrat MP Celine Widmer told Reuters on Saturday (29/4/2023).

Widmer also advocated for expanding the board from three members to five or seven. The policy to save Credit Suisse arose because the number of board members was small, so there were not many protests.

He also questioned what role central banks will play in banking regulation in the future. His views were shared by members of other parties.

Center-right Free Liberal MP and former president of parliament’s economics committee, Christian Luscher, thinks extending the governing council from three to five members is a good idea. Green Party MP Gerhard Andrey, a current member of the parliament’s finance committee, said the current structure of the SNB is not much different from 100 years ago.

“Although the SNB has done a pretty good job of stabilizing prices and inflation. The SNB needs to grow and be more diversified to address the challenges that will come,” said Andrey.

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