SNB head leaves after eventful years: Big Thomas for big problems
Published: Friday, Mar 1st 2024, 13:01
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One thing you can't say about Thomas Jordan's twelve-year tenure at the helm of the once dusty Swiss National Bank is that it was boring. Even when he took office, it was the result of an affair. The end result was the downfall of the major bank Credit Suisse.
The man with the stature of a bear with big paws was the right man for the turbulent events during his time in office: a big man - in the truest sense of the word, who had the big problems under control. His nickname in central banking circles was "Big Thomas".
His path to the top of the SNB was paved by a foreign exchange affair: Jordan's predecessor Philipp Hildebrand stumbled across his then wife's dollar purchases in 2012.
Just a few weeks before the surprising introduction of the minimum euro exchange rate on September 6, 2011, the SNB had bought around half a million US dollars worth of foreign currency, which appreciated significantly following the monetary policy measure. According to Philipp Hildebrand, this happened without his knowledge. The incidents had no legal consequences for him, but he had to go, clearing the way for Jordan.
Big contrast to the predecessor
The contrast was great: the darling of the gossip magazines Hildebrand, who basked in the spotlight, was followed by the down-to-earth Jordan, who is never arrogant and is friendly in his dealings with everyone.
He was diametrically opposed to Hildebrand, not only in appearance but also in action: the SNB learned its lessons from the foreign exchange scandal, which made waves in Switzerland at the end of 2011 and beginning of 2012. In spring 2012, the new SNB head Jordan rigorously tightened controls on his employees' private financial transactions. Thomas Jordan declared at the time that it should no longer even be possible for such problems to arise.
Abolition of the minimum exchange rate causes franc shock
His time at the helm of the SNB coincided with a period of extraordinary challenges. Under Jordan, the SNB had to take far-reaching monetary policy steps to maintain price stability and financial stability in times of economic turmoil.
In the battle to defend the minimum euro exchange rate of 1.20 francs, the SNB accumulated a huge mountain of foreign currency. After several years, however, this policy could no longer be maintained.
Jordan caused a sensation on January 15, 2015, when the SNB unexpectedly lifted the minimum exchange rate. This immediately sent the Swiss franc soaring and caused massive swings in foreign exchange trading.
Switzerland becomes a high-price island
The franc shock was a hard blow for the Swiss export industry: suddenly Swiss prices abroad were 20 percent more expensive and products were much less competitive. The local tourism industry also suffered: the strong franc finally turned Switzerland into a high-price island, which led to a marked decline in visitors from abroad.
On the other hand, shopping tourists, who went bargain hunting in droves in neighboring countries, were delighted. After all, the National Bank was able to retain control of its monetary policy by lifting the minimum euro exchange rate.
Jordan was once again at the forefront of the coronavirus pandemic, which caused the global economy to crash. The Swiss government and the Swiss National Bank came to the aid of struggling Swiss companies with aid packages worth billions.
After the end of the pandemic, demand skyrocketed. The outbreak of the Russian war of aggression in Ukraine fueled inflation like an accelerant: electricity, gas, petrol, raw materials, food - everything became scarce and massively more expensive.
Price stability well under control
In this case, Jordan fought the battle as a knight for price stability: the SNB suspended foreign exchange interventions, which led to the appreciation of the Swiss franc and slowed down the inflation of imported goods. As a result, the price spiral in Switzerland turned much more slowly than abroad, where prices soared by double digits.
As a result, the SNB did not have to raise key interest rates as much as foreign central banks, which was a relief for mortgage holders and the real estate sector. According to the unanimous opinion of experts, Jordan had price stability under control.
The Biel native also persistently defended the SNB against political covetousness: Politicians of all stripes repeatedly outbid each other with demands as to what the SNB's mountain of foreign currency could be spent on. And activists demanded that the SNB take climate policy goals into account in its investment policy. But Jordan remained firm and referred to the SNB's legal mandate to maintain price stability.
Wormwood drop CS demise
As hands-on as the former water polo player had been in all crises up to that point, he left a pale impression when Credit Suisse went under. Neither the supervisory authorities SNB and Financial Market Authority Finma nor the Ministry of Finance were able to stop the downward slide of the major bank, which had been overrun by clients withdrawing their money since fall 2022.
The last emergency injection of CHF 50 billion in mid-March 2023 fizzled out ineffectively: three days later, on March 19, the Federal Council, SNB and FINMA had to announce the takeover of CS by UBS by emergency law. When asked why the SNB had not bailed out the reeling CS with 50 billion earlier, Jordan said that this would have caused additional unrest and further damaged confidence in CS. The argument is not convincing.
Way clear for Vice President
Jordan is now leaving in the fall and thus before the report of the parliamentary commission of inquiry into the downfall of CS is published. This will allow him to prevent his departure from being linked to the report, which is expected at the end of the year, if the report contains any incriminating material relating to the SNB's role in the downfall of CS.
Jordan is also clearing the way for his pupil Martin Schlegel, who was promoted to his deputy in mid-2022 directly at Jordan's request. The number 3 on the Governing Board, Andréa Maechler, was bypassed. She subsequently left the SNB. Schlegel, who has worked at the SNB for over 20 years, is now considered the favorite to succeed Jordan if an internal candidate is elected to head the SNB. The election of an external candidate would be a surprise.
Even if some experts consider Schlegel to be too young: At 47, he is only slightly younger than Jordan was when he was elected at 49.
©Keystone/SDA
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