# Analysis-Powerful Swiss central bank faces reform calls in wake of Credit Suisse rescue Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-04-28 Category: BANKING Category URL: https://financedigest.com/category/banking Meta Title: Swiss National Bank Governance Under Scrutiny Meta Description: Critics are urging for an overhaul in governance at the Swiss National Bank, highlighting concerns about concentration of power and lack of transparency. URL: https://financedigest.com/analysis-powerful-swiss-central-bank-faces-reform-calls-in-wake-of-credit-suisse-rescuehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-04-28t050907z2lynxmpej3r05irtroptp4swiss-snb-rates-1736814088155-compressed.jpg) # Analysis-Powerful Swiss central bank faces reform calls in wake of Credit Suisse rescue By John Revill ZURICH (Reuters) – The Swiss National Bank is facing calls for an overhaul in its governance, with critics saying too much power lies in the hands of its chairman Thomas Jordan and that more transparency is needed. The SNB played a major role in the state-sponsored rescue of Credit Suisse making 250 billion Swiss francs ($280 billion) of liquidity available to ease its takeover by UBS. In the wider economy, its monetary policy has led to it building up a [balance sheet](https://www.financedigest.com/ecbs-villeroy-lays-out-plan-for-shrinking-balance-sheet.html "ECB’s Villeroy lays out plan for shrinking balance sheet") of nearly 900 billion Swiss francs – equivalent to 113% of Swiss economic output. All that has raised concerns about the concentration of power in the SNB’s three-person governing board overseen by Jordan, smaller than the policy-making teams of other [major central banks](https://www.financedigest.com/banks-oil-majors-lift-british-shares-higher.html "Banks, oil majors lift British shares higher") and one which retains a high level of discretion over its decision-making process. Jordan, who has led the board since 2012, has stamped his authority on the central [bank during a period where it has upended currency markets](https://www.financedigest.com/getting-out-of-the-static-curve-to-decide-the-growth-of-umbilical-cord-blood-banking-market.html "Getting Out Of The Static Curve To Decide The Growth Of Umbilical Cord Blood Banking Market") by scrapping the Swiss franc’s peg, and introduced the world’s lowest interest rates before joining others in tightening policy as inflationary pressures grew. The governance concerns have been brought centre-stage by the search for a new member to replace Andrea Maechler, the first woman to serve on the SNB’s governing board. She leaves at the end of June and calls are emerging for her to be succeeded by an independent, female candidate. With the current composition of the governing board of the [Swiss National Bank](https://www.financedigest.com/swiss-national-bank-seeks-banking-regulation-review-after-credit-suisse-crash.html "Swiss National Bank seeks banking regulation review after Credit Suisse crash") I am worried there is a strong concentration of power in very few hands and a too powerful role of the chairman,” Celine Widmer, an MP for the left-leaning Social Democrats who has raised questions about the selection process to replace Maechler, told Reuters. Widmer also advocated the expansion of the governing council from three members to five or seven and noted more generally there had been a “lack of questioning” about the role of the SNB in the rescue of [Credit Suisse and what role it will play in banking](https://www.financedigest.com/credit-suisse-shares-hit-record-low-after-report-bank-is-looking-to-raise-cash.html "Credit Suisse shares hit record low after report bank is looking to raise cash") regulation in future. Her views were echoed by members of other parties. Probably extending the governing council from three to five members is a good idea,” said Christian Luscher, an MP the centre right Free Liberals, a [former president](https://www.financedigest.com/sri-lanka-top-court-allows-proceedings-against-former-president-rajapaksa-others.html "Sri Lanka top court allows proceedings against former President Rajapaksa, others") of parliament’s economy committee, who said the matter should be considered. Green Party MP Gerhard Andrey, a current member of parliament’s finance committee, said the SNB’s current structure was not “much different than it was 100 years ago.” Although the SNB has done a pretty good job to stabilize [prices and inflation..it needs to evolve and have more diversity to tackle](https://www.financedigest.com/french-retailer-carrefour-to-freeze-prices-on-100-products-to-tackle-inflation.html "French retailer Carrefour to freeze prices on 100 products to tackle inflation") the upcoming challenges,” said Andrey. The Swiss parliament would have to approve any expansion of the SNB’s board. ## CLOSED DOORS While past ECB chiefs like Mario Draghi have faced criticism for forcing through their views, current boss Christine Lagarde has said her role is to forge consensus among the [euro zone’s](https://www.financedigest.com/euro-zone-services-booming-but-sentiment-recovery-may-have-stalled-ecbs-lane.html "Euro zone services booming but sentiment recovery may have stalled -ECB’s Lane") 26 policy-makers. ECB presidents regularly go before the [European Parliament to explain the bank’s](https://www.financedigest.com/u-s-european-banks-could-lose-over-5-billion-from-risky-buyout-loans.html "U.S., European banks could lose over billion from risky buyout loans") policies and published accounts of its internal discussions acknowledge when there have been disagreements, albeit without naming policymakers. The [Bank of England](https://www.financedigest.com/bank-of-england-sets-out-plans-to-sell-23-billion-corporate-bond-stockpile.html "Bank of England sets out plans to sell billion corporate bond stockpile") also publishes detailed minutes of its monetary policy discussions and reveals the spread of views on rate decisions. Its policy-makers face sometimes aggressive questioning by parliamentary committees. Although the SNB meets regularly with [government ministers](https://www.financedigest.com/growth-will-pay-for-uk-government-spending-plans-minister-says.html "Growth will pay for UK government spending plans, minister says") and committees, this takes place behind closed doors and the bank does not publish minutes of its decisions. The bank, which holds its [shareholders meeting](https://www.financedigest.com/climate-activists-take-aim-at-barclays-stanchart-shareholder-meetings.html "Climate activists take aim at Barclays, StanChart shareholder meetings") on Friday, said it saw “no advantage” in expanding its governing council. “From the SNB’s point of view, this organizational form has proven its worth, promoting intensive and efficient discussions with rapid decision-making,” the SNB said. Still, the SNB Observatory, a group of economists set up to stimulate a debate about the SNB, has suggested that the small committee meant the [central bank](https://www.financedigest.com/u-s-to-move-3-5-billion-in-afghan-central-bank-assets-to-swiss-based-trust.html "U.S. to move .5 billion in Afghan central bank assets to Swiss-based trust") was susceptible to group think. Yvan Lengwiler, from the University of Basel, said too many SNB officials spent their entire careers at the [central bank](https://www.financedigest.com/russian-central-bank-gives-legal-entities-green-light-to-trade-foreign-shares.html "Russian central bank gives legal entities green light to trade foreign shares"), a particular risk in the cases of Jordan and his deputy Martin Schlegel who have been there all their working lives. “They are both highly competent, but it is a bubble, they have no outside experience,” Lengwiler said. There really [needs to be term](https://www.financedigest.com/a-beginners-guide-the-trading-terms-everyone-needs-to-know.html "A beginner’s guide – the trading terms everyone needs to know") limits.” Such views are not shared universally. Thomas Stucki, a [former head of asset management](https://www.financedigest.com/mg-appoints-former-head-of-axa-investment-managers-andrea-rossi-as-new-ceo.html "M&G appoints former head of AXA Investment Managers Andrea Rossi as new CEO") at the SNB, said it was typical for central bank chairmen to dominate decision-making. There is no doubt that Thomas Jordan is a strong personality, but he is the chairman, the one who carries the can for the SNB’s decisions,” said Stucki, who is now [chief investment officer](https://www.financedigest.com/impact-com-names-hubspot-veteran-kim-walsh-as-chief-growth-officer.html "impact.com Names HubSpot Veteran Kim Walsh as Chief Growth Officer") at St Galler Kantonalbank. His views were echoed by Hannes Germann, an MP with the [right-wing Swiss People’s Party](https://www.financedigest.com/italys-right-wing-parties-seen-winning-power-exit-polls.html "Italy’s right-wing parties seen winning power – exit polls"), who saw no reason for an overhaul. He argued some of the reforms being aired could backfire, making the [bank more susceptible to outside influence and less efficient in maintaining price stability](https://www.financedigest.com/deutsche-banks-rollercoaster-ride-towards-more-stability.html "Deutsche Bank’s rollercoaster ride towards more stability"). “An expansion of the board contains the risk of … less independence of the board versus politics,” he said. Less independent central [banks usually lead to higher inflation rates](https://www.financedigest.com/bank-of-england-raises-rates-in-8-1-vote.html "Bank of England raises rates in 8-1 vote") in the long run. ($1 = 0.8970 Swiss francs) (Reporting by John Revill, additional reporting by Francesco Canepa in [Frankfurt and William Schomberg in London; Editing by Mark John and Toby Chopra)](https://www.financedigest.com/analysis-frankfurt-stirs-up-euro-clearing-battle-with-london.html "Analysis-Frankfurt ‘STIRs’ up euro clearing battle with London") --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---