Reuters: Financial Services and Real Estate: Ex-UBS CEO wants SNB to quit FX cap-paper

Reuters: Financial Services and Real Estate Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

Ex-UBS CEO wants SNB to quit FX cap-paper Jun 3rd 2012, 12:07 Sun Jun 3, 2012 8:07am EDT * Cbank has cap of 1.20 on franc to prevent recession * Blocher, Gruebel say SNB can't cap franc longer term * Economy group chief says capital controls won't work ZURICH, June 3 (Reuters) - The Swiss National Bank's franc cap of 1.20 per euro should go sooner rather than later to shield the economy, the former head of bank UBS said, while some Swiss parliamentarians called for capital controls to forestall an influx of safe-have flows from the crisis plagued euro zone. The SNB capped the franc at 1.20 per euro last September, after it shot up strongly on safe-haven buying from the euro zone. With the bloc's crisis threatening to claim Spain, concerns in Switzerland are mounting it may see huge capital inflows that overwhelm the cap on the franc. Oswald Gruebel, chief executive of flagship bank UBS until last year, said on Sunday in the newspaper Der Sonntag that the central bank should give the currency cap up. "The longer we stick with it, the higher will be the price we all pay for it," Gruebel said. The SNB cited the risk of deflation and recession as a justification for implementing the cap, which has met with wide support in Switzerland thus far. Christoph Blocher, long an opponent of former SNB head Philipp Hildebrand and mastermind of the right-wing Swiss People's Party (SVP), the country's biggest political force, agreed the central bank needed to realise it would not be able to enforce the cap in the long term. "At some point the free market must be able to determine the exchange rate," he was quoted by Der Sonntag as saying. "When the right moment is to allow it to trade freely, is ultimately up to the central bank." In an opinion piece Beat Shmid, one of Der Sonntag's editors, also said the SNB needed an exit strategy. A week ago, SNB Chairman Thomas Jordan said capital controls were among the measures being examined by a task force for the event of Greece leaving the euro. Separately, in the newspaper SonntagsZeitung, Susanne Leutenegger Oberholzer, a leading members of the Social Democrats (SP), said the SNB needed to isolate Switzerland's capital market and introduce negative interest rates. The paper said Christophe Darbellay, head of the centre-right Christian Democrats (CVP), shared her view on capital controls. Yet the director of business group economiesuisse said blocking inflows of funds would be tantamount to poison, saying three-quarters of Swiss francs were traded abroad. "The effort needed for such controls would be enormous," Pascal Gentinetta told the SonntagsZeitung. "Moreover the effect is not guaranteed and involves simultaneous disadvantageous for exporters." Because many francs were not stored in bank accounts but were invested in shares or other assets, imposing a deposit levy also would not work. (Reporting by Catherine Bosley) Link this Share this Digg this Email Reprints

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