* SNB council forced Hildebrand out over emails to bank
* Ex-boss Roth: Hildebrand "error of judgement" was serious
* Swiss govt expected to confirm Jordan as new SNB boss
* SNB council starts search for new board member
* Upheaval not seen affecting monetary policy
By Catherine Bosley
ZURICH, Jan 10 Switzerland's central bank
was seeking a new leader on Tuesday to contain the strength of
the country's safe-haven franc after apparently forcing out
Chairman Philipp Hildebrand when emails failed to clear him of
involvement in a currency trade by his wife.
The supervisory council of the Swiss National Bank made no
statement after a six-hour meeting on Tuesday, keeping up
suspense on who will now steer the franc through an
unprecedented period of strength.
The issue is likely to dominate the Swiss government's
weekly meeting on Wednesday, which will be followed by a press
Hildebrand's wife Kashya, a former hedge fund trader who now
runs a Zurich art gallery, bought 400,000 Swiss francs
($418,000) worth of dollars on Aug. 15, three weeks before her
husband oversaw steps to stem demand for the franc by investors
alarmed by the debt crisis in the neighbouring euro zone. She
later sold the dollars at a higher rate.
Hildebrand quit his post on Monday, saying he could not
provide conclusive evidence that he had been unaware of the
trade and that the intense public scrutiny over the affair was
compromising his credibility.
Only last week, he resisted calls to step down, saying he
only learned of his wife's trade a day after she made it.
Emails between Kashya, Hildebrand and their Sarasin bank
client advisor Felix Scheuber, released by the SNB on Monday,
showed the central banker had been involved in discussions on a
dollar trade but left it unclear whether he had approved it.
After examining the email exchange, the SNB's advisory
council indicated to Hildebrand on Saturday that his position
was no longer tenable, two Swiss newspapers reported.
One member of the bank council contacted by Reuters who
declined to be named did not directly confirm the report but
noted that Hildebrand had failed to thank the bank council at
his farewell news conference.
In a statement on Monday, the council said it accepted
Hildebrand's decision to resign which it said he had taken in
order to protect the institution.
Hansueli Raggenbass, the head of the SNB council which was
discussing on Tuesday choosing a new member for the three-person
policy-setting governing board, declined to comment on the
reports as he arrived at the central bank.
But Raggenbass defended his handling of the scandal: "I'm
convinced that I've done the job correctly and with engagement".
In a note summarising an Aug. 15 meeting, advisor Scheuber
said Hildebrand "would leave it up to his wife Kashya to decide"
whether to buy dollars. Scheuber said he made the trade later
that day after meeting Kashya at her art gallery office.
In an email from Hildebrand to Scheuber the following day,
copied to his wife and the SNB general counsel, he wrote: "We
never discussed any dollar purchases yesterday. Given Kashya's
email response and copy to me, I assume she gave you the order.
"In future, for compliance reasons, you are not authorised
to execute any currency transactions unless the order comes from
me or I confirm it," he said, adding "Kashya: sorry about that
but currencies really are a special case here."
Scheuber replied: "Yes, Kashya yesterday gave me the verbal
order, followed by the email later on. I also remember you
saying in our yesterday's conversation that if Kashya wants to
increase the USD exposure then it is fine with you."
Jean-Pierre Roth, the former SNB chairman who handed over to
Hildebrand two years ago, said his successor should have
reversed the trade as soon as he became aware of it.
"He knew that several days later he would change monetary
policy which would affect the franc exchange rate," Roth told
daily Le Temps. "He made a serious error of judgement
unfortunately and today he must pay the consequences.
"In a very difficult economic and monetary environment, the
credibility of the SNB has been hurt, the bank is weakened."
David Marsh, co-chairman of the Official Monetary and
Financial Institutions Forum, agreed.
"At a time when central banks all over the world have become
far more active and much more exposed to publicity as a result
of the financial crisis and its aftermath, central bankers have
to show almost superhuman probity in all their financial
dealings. This, manifestly, Hildebrand did not do," he wrote.
The SNB's supervisory council said on Monday Vice Chairman
Thomas Jordan, who joined the SNB in 1997, would take over as
chairman for the time being, with the government expected to
confirm him soon in the postion permanently.
Jordan, who enjoys a solid reputation, heads the SNB's
regulatory department, which is pushing for flagship banks UBS
and Credit Suisse to firm up their balance sheets.
Jordan said on Monday he was prepared to take the top job on
a permanent basis if the government asked him to do so and
stressed his determination to continue to enforce the 1.20 per
euro cap on the franc that the SNB imposed on Sept. 6.
The SNB is likely to look for another German speaker to
replace Hildebrand on the governing board to complement
French-speaking Jean-Pierre Danthine and German-speaking Jordan.
Swiss public institutions always seek to balance representatives
from the different language groups in this multilingual country.
The three most likely internal candidates are the current
deputy members: Thomas Moser, Thomas Wiedmer or Dewet Moser.
Other names mentioned were those of university professor
Beatrice Weder di Mauro as well as Aymo Brunetti and Serge
Gaillard, both board members of the State Secretariat for
Economic Affairs (SECO).
The SNB council said on Saturday it would overhaul its
internal rules concerning board members' own trading and examine
all transactions they made over the past three years.
The Swiss franc rose slightly on the news of Hildebrand's
departure, but the market is not expected to test its cap
because of the upheaval.
"The credibility of a central bank does not depend on one
person," said Daniel Hartmann of Bantleon Bankan, "Besides, with
Thomas Jordan the SNB has an experienced person on the board.
The exchange rate will be influenced more by other factors, such
as the euro zone crisis."