Swiss bank giants torn on franc peg decision

Swiss bank giants torn on franc peg decision

Switzerland's two biggest banks on Sunday gave divergent opinions on the Swiss National Bank's decision to put a floor on the Swiss franc's exchange rate against the euro, local media reported.

Urs Rohner, chairman of the board of directors of Credit Suisse, said that “the decision was right to put a floor at 1.20” francs per euro, the weekly NZZ am Sonntag said.  

But Oswald Gruebel, CEO of UBS, in an interview in the weekly Der Sonntag, called the move “risky”.  

“It was a heroic choice … but to be a hero is risky,” he said.  

As a small country, Gruebel said, Switzerland cannot dictate its currency’s exchange rate and likened the move to the battle between David and Goliath.  

“But David won. Let’s hope he does so again,” he said.  

On Tuesday the Swiss National Bank put a floor on the franc’s exchange rate at 1.20 francs per euro.  

The Swiss franc, considered a haven currency, has been rising as investors seek refuge from economic turmoil abroad.  

In early August it was up about 20 percent against the euro — briefly flirting with parity — and 25 percent against the dollar compared to 2009, to the detriment of local exporters.  

Rohner, of Credit Suisse, added that he thought the franc was still overvalued at 1.20 francs per euro, and said the real exchange rate should be “around 1.35 to 1.40”.