President of the Swiss National Bank, Thomas Jordan from Bienne, is holding his last press conference this Thursday. A look back at a career marked by the rescue of UBS and then the debacle of Credit Suisse, the financial crisis and that of the euro, but also negative interest rates before the return of inflation.
He embodies the institution all by himself. The Swiss National Bank (SNB) and its president Thomas Jordan will nevertheless separate, after almost three decades, at the end of this month. This Thursday, the Bienne native will lead a final press conference where he should announce a further drop in interest ratesIt will then be the turn of Martin Schlegel, who is said to be his dauphin, his spiritual son, to take the reins.
>> Read about this: Zurich-based Martin Schlegel appointed head of Swiss National Bank
With an ultra-discreet profile in a solid build, Thomas Jordan will be able to leave “his” central bank without fanfare, but with a light mind, if we are to believe economists. “His record is rather positive if we look at inflation, especially compared to our neighbors,” estimates Nadia Gharbi, economist at Pictet Wealth Management.
Its balance sheet is rather positive if we look at inflation, especially compared to our neighbours.
Even if he was a bit lucky: “It is true that Switzerland has benefited from the strength of the franc, particularly in recent years when the prices of raw materials have increased. This strength of the franc has made it possible to reduce imported prices and therefore to have an inflation rate that rose less than in other countries.”
A “courageous” decision
As a result, in recent years, while prices have soared above 10% in Europe and the United States, they have barely exceeded 3% at the highest in Switzerland. This has allowed the SNB to be the first to lower its interest rate again this year, a “courageous” decision, according to Gero Jung, chief economist at Mirabaud Asset Management.
It is quickly forgotten, but it is not only inflation that has motivated the SNB’s interventions in recent years, he points out in passing. For a long time, before the pandemic disrupted the global economy, it was actually the opposite: deflation, i.e. an uncontrollable spiral of falling prices, threatened to weigh down the Swiss economy for years.
Bulk purchases of foreign currency
Having joined the management 17 years ago and become president in 2012, following the sudden departure of Philipp Hildebrand accused of conflict of interest, Thomas Jordan was there when it was time to start fighting against the strong franc. The SNB began buying foreign currencies to the tune of tens of billions to weaken its currency. This was the start of several controversies: its balance sheet swelled to record proportions. As a result, the institution began to make profits and then astronomical losses.
>> Read also: The franc has never been so strong against the euro since the lifting of the floor rate And The SNB has already broken records for foreign currency purchases
In 2011, the future president was part of the trio that decided to establish a floor rate against the euro. He would be at the helm of the ship a few years later, in January 2015, when the pressure was such that it had to be removed, with such a sudden blow that the financial markets waltzed, the franc jumped and, a rare occurrence, the bosses and the unions choked in unison, anticipating (exaggeratedly) unprecedented damage to the economy.
Negative interest rates
It is to this economist trained in Berne, then at Harvard, that we also owe negative interest rates. The only one in the world to venture so far, the SNB will even introduce a rate of -0.75% in 2015 which will remain in place for seven years and will also make its share of happy people – the Confederation is paid to borrow – and unhappy people, in particular the banks and customers who must pay this sort of tax on savings.
>> Read also: Swiss National Bank ends negative interest rate
Bank Rescuer
He is said to be much less interested in this aspect of his mandate, and yet: financial stability will also have occupied him in times of acute crisis. This swimming champion is also a bank savior: he was already at the bedside of UBS in 2008. It was he who had the task of managing the toxic assets of the big bank on the brink of the abyss during the subprime crisis.
Fifteen years later, it was he who orchestrated the rescue of Credit Suisse, which had to be propelled into the arms of UBS. A last-second solution that earned him and his other instigators, Finma and the Federal Council, strong reactions for failing to anticipate a problem that had been apparent for several months.
>> Read also: Swiss National Bank to learn lessons from Credit Suisse crisis
Lack of imagination
A relatively good record, but not without criticism, therefore. For Michael Malquarti, director of risk management at Quaero Capital in Geneva, one could also have hoped for a little more imagination or a willingness to reform this institution.
Its governance, with only three people, raises questions, for example: “It seems relatively weak given the monetary policy issues.” For him, Thomas Jordan has also been too conservative on the SNB’s reserve investment policy, which takes relatively little account of ecological issues.
Under pressure from NGOs, the institution made concessions by banning certain companies, including those active in coal mining. Not enough for many activists, but more than enough for those who hold a more traditional line where a central bank has no role to play in the energy transition.
Mathilde Farine
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