January 9, 2012

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.

“He will make a statement on his decision at 3.15 p.m.” the bank said in a statement today. “He will also make a number of documents available.”

Hildebrand’s departure from the SNB’s three-member board deprives Switzerland of a policy maker who managed to stem the franc’s rally to records against the dollar and the euro, which had threatened to derail the economy.

While the SNB agreed to publish rules on personal financial ethics and an independent probe cleared the central bank head of wrongdoing, a dollar purchase over $504,000 carried out by his wife in August, three weeks before the SNB imposed a franc cap, was found “sensitive.”

Hildebrand joined the central bank in 2003, becoming its youngest ever policy maker, and took over as president in January 2010. Before that he was chief investment officer at private banks Vontobel Group in Zurich and Union Bancaire Privee in Geneva.

As head of the SNB, he helped toughen financial regulation, forcing UBS AG and Credit Suisse Group AG to boost capital buffers. He also lowered borrowing costs to zero and in September introduced the first currency ceiling since the 1970s to help protect the economy.

Currency Ceiling
As the global financial crisis spurred investors to buy francs, a haven in times of turmoil, the central bank tried to initially stem its advance by selling the currency in the 15 months through June 2010. Hildebrand introduced the cap in September after the franc reached a record against the euro, trading near parity in the previous month.

That move came three weeks after a currency purchase by Kashya Hildebrand. A former hedge fund employee who owns a Zurich art gallery, she has defended the purchases, saying she bought dollars because the currency was “at a record low and almost ridiculously cheap.”

Hildebrand’s first round of currency purchases forced the SNB to declare a record loss in 2010 and prompted calls from Christoph Blocher, vice president of the Swiss People’s Party, for him to resign. Bank Sarasin, a Basel-based private bank, said on Jan. 3 it had fired an employee who helped pass data on the trades by the Hildebrands to Blocher.

Source: Bloomberg