Swiss government denies asking central bank for new franc cap

16 Mar11:37 PM

[ZURICH] Switzerland's government never urged the central bank to set another cap on the franc, the finance minister minister said.

Politicians' focus on the Swiss National Bank, which is statutorily independent, has increased after it surprisingly gave up its cap of 1.20 per euro on the franc in January, exposing the economy to the risk of weaker growth and higher unemployment.

Questions as to whether the government was unduly trying to exert pressure on the central bank intensified after a March 4 newspaper report said the economy and finance ministers wanted the ceiling on the franc re-introduced.

"In no way did the two departments propose or even demand a new minimum exchange rate," Finance Minister Eveline Widmer- Schlumpf said before parliament in Bern on Monday, adding the central bank wasn't allowed to take advice from the executive branch.

"The government mentioned the question of potentially another minimum exchange rate only in connection with the SNB's remaining options in the current situation."

Government spokesman Andre Simonazzi denied the Handelszeitung report at the time.

Parliament has on several occasions, including in 2011 after the cap on the franc was set, held debates on the strength of the Swiss currency and its effect on the economy. This year, politicians in parliament's upper house requested the SNB exempt social insurance and pension funds from its negative deposit rate.

The central bank cut its deposit rate to minus 0.75 per cent when it gave up the cap on the franc on Jan 15.

Meanwhile, parliamentarian Thomas Minder, who spearheaded a successful referendum in 2013 to impose tough limits on executive pay, has put forward an initiative to expand the SNB's three-person governing board and have appointees voted upon by parliament rather than named by the government.

Nominations to the SNB's top echelon have tended to observe the tradition of a balanced representation of linguistic groups. Andrea Maechler will be the first woman to serve on the institution's rate-setting committee when she joins in July to replace retiring Jean-Pierre Danthine.

BLOOMBERG