Why Should A Swiss Central Banker’s Wife Get Punished For Being Able To Navigate The FX Market, Unlike *Someone* She Knows?By Bess Levin
As you may have heard, Phillip Hildebrand, the President of the Swiss National Bank, is potentially in a bit of hot water today, on account of some trades made by his wife, Kashya. Apparently the Mrs. made three transactions last year that are being examined, particularly one that “appeared to benefit in part from the central bank’s aggressive move last September to control the rise of the Swiss franc.”
Late Tuesday, Ms. Hildebrand told Swiss television that in August she “was interested in buying dollars because the currency was at a record low, and in fact almost ridiculously cheap.” Ms. Hildebrand added that, having worked in the financial sector between 1984 and 1999, she was “always watching the markets” and “felt confident making this transaction.” She said she made a dollar purchase Aug. 15, when the U.S. currency was close to a record low against the Swiss franc. Two days later, on Aug. 17, the SNB decided to swamp the Swiss franc money market with liquidity, which prompted the franc to weaken. Then on Sept. 6, the SNB introduced a minimum exchange rate of 1.20 francs against the euro, an aggressive move that caused the dollar to gain 13% against the Swiss currency within a week.
According to an inquiry by PriceWaterhouseCoopers, the SNB’s auditors, Ms. Hildebrand, who has run a Zurich art gallery since 2001, sold francs and bought about $504,000. Ms. Hildebrand told Swiss television Tuesday that about 70% to 80% of all transactions at her art gallery are conducted in dollars and she therefore wanted to seize on the buying opportunity. The SNB’s general counsel was informed about the transaction around 12 hours later and gave his approval, she added. According to emails gathered during the PWC probe, Mr. Hildebrand learned of the transaction a day after it was conducted.
According to the Journal, Mr. Hildebrand “immediately” got on the horn with his client adviser at Bank Sarasin & Co, where the trades were made, and ordered that in the future, “currency transactions must be made only if he himself ordered them, or if he confirmed such an order.” Which, sure, probably seems like a good idea, in light of Hildebrand’s gig and the desire to not look like he was front-running Switzlerland. Having said that, apparently it was in the couple’s best interest to have Kashya overseeing their household finances. While the two were both hedge fund employees back in the day at Moore Capital (where they met in the ’90s), apparently one of them’s still got it, and one of them don’t.
PWC also examined two currency transactions by Mr. Hildebrand. On March 10, Mr. Hildebrand sold francs and bought $1.17 million. The auditors found that the money resulted from the sale of a Hildebrand family property in late 2010. On Oct. 4, Mr. Hildebrand sold $516,000 and bought francs in order to buy another property in Switzerland several days later. PWC determined that Mr. Hildebrand lost on both currency transactions and declared that the real estate deals justified the purchases.