Questions about controversial foreign exchange transactions cost Philipp Hildebrand his job as president of the Swiss National Bank. Swiss leaders are eager to put the affair behind them. But the damage to the country’s financial credibility may already b
ZURICH – Even before Philipp Hildebrand finally resigned, the scandal engulfing the head of the Swiss National Bank (SNB) was making waves at home and abroad. The Hildebrand family's controversial foreign exchange transactions were casting both the bank and its former president in an increasingly poor light. That had consequences not only for the credibility of the SNB Directorate but also for Switzerland's reputation in the many international organizations of which it is a member.
Hildebrand wasn't just SNB president. He was also vice-president of the Financial Stability Board (FSB). The FSB is an international organization that monitors the global financial system. Behind the scenes last summer, Switzerland was offered the VP position to make up for non-membership in the G-20 club – a membership that may yet lie ahead as the criterion for entry is the importance of a country in the world economy. The FSB position further enhanced Switzerland's importance in the international arena.
For years, Switzerland has wanted to be part of the club of the world's most important industrial nations but membership has so far eluded the Confederation. If Switzerland is a prominent member of the International Monetary Fund (IMF), the OECD and the FSB it is partly because "as a non-member of the G-20 it is all the more important for Switzerland to play a strong role in these organizations," says Mario Tuor, spokesman for the State Secretariat for International Financial Matters (SIF).
Federal authorities are eager to turn the page on the Hildebrand affair. Swiss leaders deemed media coverage of the affair to be "too dramatic," according to government sources.
A call for quick and decisive action
According to Klaus Armingeon, director of the Institute of Political Science at the University of Bern, the SNB's reputation had already taken a beating before Hildebrand resigned. "Not only was President Hildebrand's possible misconduct detrimental to the reputation of the SNB, so was the political staging," he says.
Since Hildebrand has now resigned and his eventual misconduct may be subject to further revelations during investigations to follow, all other actions to clear the situation up must be quick and decisive, says Armingeon – "mainly to prevent further damage." Armingeon fears massive collateral damage from the affair for Switzerland both politically and for various institutions. From his standpoint it would have been better "to put all the facts on the table, and report on them openly, no holds barred, from the outset."
Now that Hildebrand is no longer the head of the SNB, he also loses his position at the FSB, leadership of which is comprised exclusively of central bankers and representatives of finance ministries. FSB spokeswoman Margaret Critchlow declined to reply to this paper's question as to whether, at the group's next plenary assembly in Basel on Jan. 10, the damage to Switzerland's reputation would be discussed.
Hildebrand's resignation may also harm Switzerland's significant position in the world of international finance. As far as the G-20 is concerned, it may well further put off the possibility of Switzerland becoming a member.
Read the original article in German
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