Bloomberg News

SNB’s Jordan Says Franc Still Highly Valued, Sonntag Reports (1)

June 02, 2013

Swiss National Bank President Thomas Jordan

Swiss National Bank President Thomas Jordan speaks during the bank's annual general meeting in Berne, Switzerland. Photographer: Valentin Flauraud/Bloomberg

Swiss National Bank President Thomas Jordan said the franc remains strong even after recent weakness and pressure on it to appreciate may return, Schweiz am Sonntag reported, citing an interview.

“We have seen some easing in the financial markets -- the pressure on the franc has weakened,” Jordan told the paper. “But at the current level it is still highly valued,” he said. “We can’t exclude that in these uncertain times we experience setbacks.”

The Swiss currency is seen as a haven against the euro at times of heightened global stress, according to a study published by the SNB in April. That pushed the franc near parity with the euro in 2011 and caused the central bank to set a ceiling of 1.20 against euro in September of that year to ward off deflation and a recession.

Comments by Jordan last month that a shift in the cap and negative interest rates were among possible steps the SNB could take prompted the franc to weaken past 1.26 per euro for the first time in two years on May 22.

“As a matter of principal we don’t exclude any measures that will help us ensure appropriate monetary conditions,” Jordan told Schweiz am Sonntag. The SNB’s policy on the franc ceiling “isn’t one of fine-tuning,” he said.

The franc closed at 1.2414 per euro on May 31. The currency has declined 2.7 percent against the euro this year. Against the dollar it closed at 95.51 centimes.

Property Bubble

The cap has given Swiss companies “a certain amount of security in planning,” according to Jordan. “Still, it’s a big challenge for them to deal with the exchange rate.”

Switzerland’s real estate market is experiencing its biggest gains in two decades, with the the SNB holding its benchmark interest rate at zero since August 2011.

While the property market is demonstrating “very dynamic development,” there’s a risk that “we are in fact headed toward a bubble,” Jordan said. “At the same time, we have a very low rate LEVEL which one can assume will remain that low for a long time.”

The SNB has repeatedly urged banks to be cautious when allotting mortgages. The government has also ordered lenders to hold an extra 1 percent of risk-weighted assets linked to domestic residential mortgages. They have until the end of September to comply.

While real estate price growth had so far slowed “insufficiently,” it’s too early to evaluate the impact of the buffer, Jordan said in the interview.

Gold Holdings

“There is a considerable proportion of newly issued mortgages” that have been granted to people who’ll be challenged to repay them in the longer term, he said.

The central bank president also said the SNB has no plans to buy or sell gold. It may purchase the precious metal in the future should this become necessary, according to Jordan.

Regarding potentially saving Swiss lenders that may face bankruptcy over fines paid to settle a dispute over untaxed assets of U.S. citizens, Jordan said this wasn’t in the SNB’s remit.

“It’s not the central bank’s responsibility to save banks if they are insolvent,” Jordan told the paper. “It has the duty of contributing to the system’s stability.”

To contact the reporter on this story: Zoe Schneeweiss in Zurich at

To contact the editor responsible for this story: Craig Stirling at

The Aging of Abercrombie & Fitch
blog comments powered by Disqus