GENEVA — Swiss National Bank chief Philipp Hildebrand resigned Monday, acknowledging he could not prove his innocence amid a public uproar over his private currency deals.
Hildebrand’s resignation took effect immediately, Switzerland’s central bank said in a brief statement. Vice chairman Thomas Jordan stepped in as chairman.
The move came just before a Swiss parliamentary committee was to grill Hildebrand behind closed doors about currency deals that raked in fat profits while his own central bank was actively working to lower the value of the Swiss franc.
Switzerland has been in an uproar since news broke of the dollar swaps that netted Hildebrand and his wife Kashya, a former currency trader, tens of thousands of dollars in profits last year.
At an impromptu press conference in the Swiss capital of Bern, Hildebrand emphasized Monday how proud he was of his achievements and of working for financial institutions in Switzerland and international organizations such as the World Bank.
“I would like to think I have been a damn good central banker,” Hildebrand told reporters. “I deeply regret these mistakes as well as the entire situation.”
Last Thursday he broke weeks of silence over the deal to deny any breach of central bank rules and to announce that he was donating the profits to charity. Four days later, he was out of a job.
It was a shocking comedown for the man who a year ago had become the central bank’s youngest-ever president and chairman at 47. The former champion national swimmer had transformed himself into a financial prodigy and a champion of Swiss banking, with one publication calling him a financial “rock star.”
“I personally advocated strongly and early for stricter capital requirements for the big banks,” he declared Monday. “The policy of the central bank was a success in recent years.”
While still maintaining that he broke no central bank rules, Hildebrand said a central bank chairman must be viewed as beyond reproach and he could not prove that his wife carried out the dollar trading on Aug. 15 without his explicit consent.
“I cannot once and for all prove that it was as I said it was,” he said.
Two key bank actions helped the couple make money by effectively speculating against the value of the franc.
On Aug. 17, the central bank increased the liquidity of the franc, which lifted the value of the dollar. Then, on Sept. 7, the bank set the minimum exchange rate of the euro at 1.20 Swiss francs. That helped to sharply raise the value of major currencies like the dollar against the franc.
The Swiss central bank, like most others, prohibits senior officials from engaging in personal trading where they might profit from insider knowledge about an upcoming monetary policy decision. Hildebrand was cleared of any wrongdoing in a report in late December.
The bank’s auditors concluded that the cheap purchase of U.S. dollars just as they were hitting a record low against the franc and two days before the SNB flooded the market with francs was “delicate.” But it found Hildebrand hadn’t breached any rules since he declared the transaction on Aug. 16.
On Monday, Hildebrand released emails further detailing the transactions.
In an Aug. 16 email to their trader, Hildebrand said he was “suprised” by his wife’s decision to sell 400,000 francs and buy dollars with them because the couple “never discussed any dollar purchases yesterday.” But the trader quickly emailed back recalling that Hildebrand had previously said it would be “fine” by him if his wife “wants to increase the USD exposure.”
The couple appears to have made about 75,000 Swiss francs ($83,000) in profits on the dollar trading, based on the amount he later donated to charity.
“The fact is: my word is my bond. I had no knowledge of my wife’s transaction that day. Unfortunately, mistakes were made in connection with these transactions,” he said.
The bank’s governing council on Monday praised Hildebrand as an outstanding banker who contributed greatly to Switzerland’s monetary policies and successfully steered the central bank though an exceptionally turbulent time fueled by Europe’s debt crisis.
Hildebrand acknowledged Monday the past few weeks have been “a difficult time.”
“This is a step that saddens me greatly,” he said, adding that he would automatically relinquish his other roles at the Bank for International Settlements in Basel and elsewhere.
Christophe Darbellay, chairman of the parliament economic committee that held a confidential session with Hildebrand, told reporters late Monday that lawmakers would prepare new regulations to prevent such trading. He said some committee members wanted to open an inquiry of Hildebrand, but they have no regulatory power over the bank.
The session was called in part to examine lingering questions such as whether Hildebrand and his wife traded currency from accounts other than the one at the Basel-based Bank Sarasin. Darbelley said his committee had not yet examined the documents released by Hildebrand, but the banker should not have to “prove his innocence.”
Details of the Hildebrands’ trading were leaked by an IT bank employee who was apparently concerned about the possibility of insider trading.
Zurich prosecutors said Friday they have opened an investigation into a possible breach of banking secrecy by the 39-year-old former Sarasin employee.