Swiss National Bank faces pressure from leftists

Switzerland’s strength can largely be attributed to its commitment to remaining and independent and neutral region in which traditional financial markets investments from global participants flourish, as well as its pragmatic approach to the issuance of its own sovereign currency as the Swiss National Bank is not entirely nationalized.

Indeed, a large proportion of the Swiss National Bank is owned by private shareholders, whose interest is to ensure profitability, thus a swift decision was taken on January 15 to remove the peg against the over-burdened Euro which sent the Swiss franc into rapid appreciation and caused unprecedented volatility in the FX markets, which at best exposed firms to negative client balances and at worst saw the end of others.

Following the event, the left-wing Social Democratic Party of Switzerland has set up a working group to examine if the Swiss National Bank should be more accountable to Parliament when it makes policy decisions.

Unlike the U.S. Federal Reserve, members of the Swiss National Bank’s governing board, many of whom are private shareholders, are not required to testify before Parliament, meeting instead privately with the cabinet.

A quick look at regions which have stuck firmly to socialist principles clearly demonstrates the difference in effectiveness between central banks, the European Central Bank being continually engaged in IMF bailouts, restructuring measures, borrowing and securing bonds against failing banks, compared to Switzerland’s conservative approach which ensures that the nation is never exposed to the woes which now affect its neighbors.

In a report today by the Wall Street Journal, it was reported that the dissent among the ranks which has brought a requirement to re-examine the independence of the Swiss National Bank comes as Switzerland continues to grapple with the fallout of the central bank’s surprise decision to remove the aforementioned peg between the Franc and Euro. The policy was deemed necessary to protect the country’s exporters, many of which are now cutting wages and shifting work abroad to cope with the strong currency.

On Friday last week, the Swiss National Bank reported a record 38.3 billion franc ($39.3 billion) profit in 2014.

“It’s unusual to see this kind of public pressure on the Swiss central bank,” said UBS economist Veronica Weisser, who said the bank is generally well regarded by the public. But the policy shift and a subsequent decision to introduce negative interest rates has had “a big impact on the economy and the country, and this has raised many questions, especially among the losers,” she said.

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