Switzerland’s central bank should consider parlaying its hefty currency reserves into political influence through a sovereign wealth fund, ex-director Phillipp Hildebrand said.
The alpine nation should debate deploying its foreign currency-heavy balance sheet into a state fund to safeguard its political interests abroad, Philipp Hildebrand said in an interview with «Neue Zuercher Zeitung am Sonntag» (behind paywall, in German) on Sunday.
«This would enable us to multiply our wealth for future generations, while at the same time sharpening our political influence in the world though foreign investments,» he told the Swiss weekly. He cited a loss of standing for Switzerland internationally, as Europe cemented a block and Asia's economy surged in the last two decades.
The pandemic and state debt load has heightened the pressure on the Swiss National Bank over its hefty profits, as finews.com reported last month.
Reserves Tick Higher
The SNB makes book profits on its investments, including stocks and gold but also billions in foreign currencies built up in an attempts to keep the Swiss franc from strengthening. «It is obvious to think about the central bank’s currency reserves as part of a strategic discussion of a sovereign wealth fund,» Hildebrand said.
Switzerland forex reserves edged higher to 896.1 billion Swiss francs ($981 billion) in January, indicating the central bank continues to buy foreign currency to keep the franc down.
«We Need A Plan»
The 57-year-old Swiss former central bank head last week withdrew his candidacy to oversee the Organization for Economic Coordination and Development after failing to secure enough backing inside the European Union.
He told the Swiss outlet that Switzerland should «very clearly» engage financial diplomacy to safeguard its political interests in a manner similar to Singapore. «With all the political differences between our two nations: we [Switzerland] need a long-term strategic plan that is similar to Singapore’s,» Hildebrand said.
Unofficial Swiss Statesman
Hildebrand noted that the SNB’s balance sheet liabilities – often omitted in discussions – as well as preserving the central bank’s independence at all costs were complicating factors. «Despite these complexities, it’s a discussion we should have.»
A vice-chairman at Blackrock for the past nine years after stepping down from the SNB in 2012, Hildebrand remains one of the most well-connected, if unofficial, statesmen for Switzerland. His unsuccessful run at the top OECD job was launched and supported by the Swiss government.
