National Bank head defends currency move

Jordan is one of three top decision-makers at the SNB Keystone

Swiss National Bank President Thomas Jordan says his institution had no choice but to remove the Swiss franc’s peg to the Euro, citing worse effects for the economy if they had waited longer to do so.

In his first interview since the January 15 decision, Jordan told Swiss Public Radio SRF that “all other alternatives would have been much worse for Switzerland” and that “putting off the decision would have had much bigger consequences” for both the country as a whole and the national bank.

Jordan said the franc continues to be overvalued but added that expects it to ultimately stabilise. He did not comment on whether the SNB is continuing to intervene in the currency markets, as some media reports have suggested, stating only that “we consider the exchange rate in total” and that “the National Bank remains on the ball” when it comes to monitoring the franc’s activity.

If the peg of CHF1.20 to the Euro had not been lifted, Jordan said the National Bank would have had to continue to massively intervene in the currency markets, shelling out CHF100 billion per month to buy up Euros and maintain the exchange rate. In six months’ time, the bank would have spent CHF600 billion – equal to Switzerland’s Gross Domestic Product.

Jordan also defended the timing of the SNB’s move, saying that “there would have been turbulence at any time” but that on that particular Thursday in January, “the markets were liquid…creating a fair playing field for all market participants”.

Jordan also views it as an advantage that decision-making at the SNB with regards to currency intervention is done by three individuals, himself included – this, he said, allows for intense discussions and quick reactions.

In addition, he added that because only the members of Switzerland’s cabinet were informed shortly before the lifting of the peg, “there was no insider trading”. People like IMF Head Christine Lagarde and European Central Bank Head Mario Draghi were only informed after the fact, and Jordan says they understood Switzerland’s decision.

Jordan hopes, in the end, that January 15, 2015 does not go down as a “black day” in Swiss history.

“People have to see that the SNB had no other choice.”