The Swiss National Bank starts the search for a new board member on Tuesday after the resignation of Philipp Hildebrand as chairman over a controversial currency trade made by his wife.
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 August 15, three weeks before her husband oversaw steps to cap the rise of the safe-haven franc. She later sold the dollars at a higher rate.
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 judgment 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.
Emails between Kashya, Hildebrand and their Sarasin bank client advisor Felix Scheuber released by the SNB on Monday showed the central banker had been aware of the dollar transaction 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, Swiss newspapers reported on Tuesday.
JORDAN SEEN AS A SAFE PAIR OF HANDS
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 position 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 is prepared to take the top job on a permanent basis if the government asks 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 September 6.
Hansueli Raggenbass, the head of the SNB council who is also under fire for his handling of the scandal, said the body would discuss on Tuesday how to proceed on finding a new member for the three-person policy-setting board.
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 directors: Thomas Moser, Thomas Wiedmer or Dewet Moser.
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, which Hildebrand had fought to stop soaring on safe-haven buying driven by the euro zone debt crisis, rose slightly on the news of his departure. But the market is not seen testing the franc 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.
At a news conference four days ago, Hildebrand had resisted calls to step down, saying he only learned of his wife's trade the day after she made it, but he admitted on Monday he could not provide final evidence to back up his assertions.
The government said it hoped the SNB would be able to turn its full attention back to monetary policy. The stability and credibility of the SNB are essential for the economy and for the good of the country, it said in a statement.
(Writing by Emma Thomasson; Editing by Mike Peacock, Dan Grebler, John Stonestreet)