Calls for tighter rules amid Swiss bank scandal

By Albert Otti Jan 6, 2012, 16:14 GMT

Zurich/Vienna - Swiss experts and media have called for stricter rules to prevent insider trading at the country's national bank, reacting to allegations that the bank's chief Philipp Hildebrand or his wife had made illegal deals.

Reports about controversial foreign exchange deals placed by Hildebrand's wife Kashya surfaced in December, but the manager faced the public in a press conference in Zurich only on Thursday, denying the accusations.

Although no legal proceedings against the Hildebrands have been initiated and external auditors of the Swiss National Bank (SNB) said they found no legal shortcomings, the scandal cast doubt on the credibility of Hildebrand and the central bank in the eyes of the Swiss public.

In a report published by SNB this week, the external auditors said however that one of the deals by Kashya Hildebrand last year was 'sensitive,' as she bought dollars for 400,000 Swiss francs (423,000 dollars) in August and sold them for a profit of 75,000 francs in October.

In the meantime, the SNB had added liquidity to the Swiss economy, and the franc's exchange rate had become more favourable for such transactions.

'I did not only act according to the rules at all times, but I also behaved in a correct manner,' Hildebrand said. However, he acknowledged there was a moral dimension to this case.

He also regretted that he did not prevent his Swiss-American wife from having carried out the deal and said he should have reversed it once he learned about it shortly after it was placed.

The manager notified his bank immediately at the time and has donated the 75,000 francs to a non-profit organization.

Swiss legal experts said Friday that Hildebrand should not have gotten involved such deals at all.

'Hildebrand should not have invested in foreign currencies. That was wrong,' Monika Roth, a financial markets expert at Lucerne University of Applied Sciences told the daily St Galler Tagblatt.

She also criticized that SNB's external auditor, PricewaterhouseCoopers, as well as the bank itself had taken Hildebrand's explanations at face value.

The SNB's rules should be tightened to ban large-scale speculative deals and to introduce penalties, criminal law expert Peter Kunz was quoted by the newspaper Berner Zeitung.

Meanwhile, media commentators questioned Hildebrand's assertion that he did not know what his wife was up to and also called for banning any speculative deals by SNB managers.

Hildebrand on Thursday proposed that all transactions above a certain value by him and his colleagues should be declared and audited.

Besides these proposals, doubts remain about Switzerlands banking secrecy. The case came to light after an IT specialist at Hildebrand's bank shared Hildebrand's data with the right-wing Swiss People's Party.