Powerful Swiss central bank faces reform calls in terms of Credit Suisse rescue

 Credit Suisse Rescue

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 (CSGN.S) making 250 billion Swiss francs ($280 billion) of liquidity available to ease its takeover by UBS (UBSG.S).

In the wider economy, its monetary policy has led to it building up a 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 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 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 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 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 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 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 26 policy-makers.

ECB presidents regularly go before the European Parliament to explain the bank’s policies and published accounts of its internal discussions acknowledge when there have been disagreements, albeit without naming policymakers.

The Bank of England 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 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 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 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, 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 limits.”

Such views are not shared universally. Thomas Stucki, a former head of asset management 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 at St Galler Kantonalbank.

His views were echoed by Hannes Germann, an MP with the right-wing Swiss People’s Party, 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.

“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 in the long run.”

KARACHI (June 16 2010): Due to Poor management of our ministry and doubtful ability of Pakistan Peoples Party to run the affair of the country, Net foreign investment has posted a decline of 15 percent during the first eleven months of the current fiscal year mainly due to slow foreign direct investment followed by global economic recession, poor law and order situation and uncertainty on political front.

The central bank on Tuesday revealed that net foreign investment comprising foreign direct investment (FDI) and portfolio investment is continuously weakening and it has registered a decline of some $330.6 million during the first eleven months (July-May) of fiscal year 2009-10. With current decline, net foreign investment has decreased to $1.896 billion during the July-May of the current fiscal year as compared to $2.22 billion in same period of last fiscal year.

"Major reason behind this dip is decline in the FDI inflows, as the foreign investors are reluctant to invest in Pakistan due to political uncertainty and worst law and order situation," economists said. However, they believed that in the next few months some improvement would be witnessed on the foreign investment, as Pakistan's economy is growing well and during the current fiscal year the country has achieved over the target GDP growth.

They said that some $1.89 billion net foreign investment during the first eleven months is also a encouraging figure, as despite the uncertainty foreign investment inflows are higher than expectations, which is a positive sign and it means that still foreign investors are interested to invest in Pakistan.

According to statistics FDI has posted a decrease of 39 percent, while portfolio investment has registered a surge of 88 percent during the period. With this reduction, FDI has declined to $2.031 billion in July-May of fiscal year 2010 as compared to $3.33 billion in corresponding period of last fiscal year, depicting a decrease of $1.3 billion. Including privatisation proceeds total private investment shows a decline of 7.2 percent to $2.57 billion during July-May of current fiscal year, which previously stood at $2.77 billion.

Banks in Pakistan

List of Banks in Pakistan

Central Bank: State Bank of Pakistan
Nationalized Scheduled Banks:
First Woman Bank Ltd.
National Bank of Pakistan
Specialized Banks
Zari Taraqiati Bank (ZTBL)
Industrial Development Bank of Pakistan
Punjab Provincial Cooperative Bank Ltd
Private Scheduled Banks
Askari Commercial Bank Limited
Bank Al-Falah Limited
Bolan Bank Limited
Faysal Bank Limited
Bank Al-Habib Limited
Metropolitan Bank Limited
KASB Commercial Bank Limited
Prime Commercial Bank Limited
PICIC Commercial Bank Limited
Soneri Bank Limited
Union Bank Limited
Meezan Bank Limited
Saudi-Pak Commercial Bank Limited
Crescent Commercial Bank Limited
Dawood Bank Limited
NDLC-IFIC Bank Limited (NIB)
Allied Bank of Pakistan Limited
United Bank Limited
Habib Bank Limited
SME Banks

Foreign Banks
ABN Amro Bank N.V
Albaraka Islamic Bank BSC (EC)
American Expresss Bank Limited
Bank of Tokyo Mitsubishi Limited
Citibank N.A
Deutsche Bank A.G.
Habib Bank A.G. Zurich
Hongkong & Shanghai Banking Corp Limited
Oman International Bank S.O.A.G
Rupali Bank Limited
Standard Chartered Bank Limited

Development Financial Institutions
Pakistan Industrial Credit and Investment Corp. Limited
Pak Kuwait Investment Company (Pvt) Limited
Pak Libya Holding Company (Pvt) Limited
Pak-Oman Investment Company (Pvt) Limited
Saudi Pak Industrial and Agricutural Investment Company (Pvt) Limited

Investment Banks
Crescent Investment Bank Limited
First International Investment Bank Limited
Atlas Investment Bank Limited
Security Investment Bank Limited
Fidelity Investment Bank Limited
Prudential Investment Bank Limited
Islamic Investment Bank Limited
Asset Investment Bank Limited
Al-Towfeek Investment Bank Limited
Jahangir Siddiqui Investment Bank Limited
Franklin Investment Bank Limited
Orix Investment Bank (Pak) Limited