ECONOMISTS: "The message of the National Bank of Switzerland - unusual"

The message which the president of the National Bank of Switzerland (SNB), Thomas Jordan, conveyed at the end of last week, is an atypical one, economists think, and they emphasize that no central banker makes random statements.

One year after the SNB lifted the peg to the Euro, which had been set at 1.2 CHF/Euros, the head of the institution stated that a powerful drop of the franc would be welcome this year for Switzerland's economy, which has been subjected to pressure in 2015, after the elimination of the cap on the exchange rate of the franc which had been set in 2011: "If the franc weakens a lot, it will be very good for the economy: exports will have a better evolution and the growth will be higher".

The message of the president of the SNB must have some inferences, and draws attention, given the fact that it comes from a central banker, economic analysts say, and they stress that no governor would make that kind of statements without subtext.

The message seems to have a style that is different than usual, and to belong to a different school of thinking, it is a far clearer message than those of other central bankers, economic consultants say.

Even though they have all said that the statements are absolutely not coincidental, economists construe them differently.

Consultant Ionel Blănculescu says: "There is no way the statements of the president of the SNB aren't a signal. Everything coming from there is a signal. But we are talking about wishes and possible and one needs to be very mindful of the ratio between the two, because what he wants is one thing and what he can do is another".

In circumstances of global crisis, Switzerland continues to be a haven and its currency is a safe haven, which means that in today's global context, the Swiss Franc (CHF) isn't weakening, said Mr. Blănculescu, who further said: "The Swiss are sentenced not to have a weakened currency. They are sentenced to have their currency strengthen. Switzerland is a neutral country, where banking secrecy is more than obvious. That is where we find the largest number of private banking banks".

According to Ionel Blănculescu, the president of the president of the SNB had the power to lift the peg imposed as an administrative measure and, in the same manner, he can once again freeze the Swiss franc at a lower value than the current one.

He also mentions that the exchange rate of the CHF is set by supply and demand, and he stated: "Everything that is happening on the oil market leads to the halting of investments, and the money surplus which was supposed to go towards these investments will temporarily head towards safe areas. The first of them is Switzerland, followed by Singapore - which is much farther -, by the US and by Central and Eastern Europe.

That is why the head of the SNB wants to say that it is not the fault of the SNB that exporters are currently having trouble.

This phenomenon of setting the trend for the CHF is not up to them. If there is a high demand of Swiss francs, then their value is weakening".

Economist Aurelian Dochia, an executive with BRD Group Societe Generale, thinks that the statement made by the president of the SNB is unusual.

He told us: "One year ago, the Swiss National Bank was in an uncomfortable situation. In 2011, it has sought to do something against speculative transactions, by imposing the 1.2 CHF/EUR exchange rate peg. Since the franc is a safe haven currency, when the international markets are uncertain, everyone moves into the franc. The SNB tried to discourage speculative movements, but the peg had an effect on its balance sheet, because the bank issued currency. Starting last year, when the cap was dropped, the pressure has returned, which is not good for the Swiss economy. All the Swiss companies are affected by the strengthening of the CHF.

Under these circumstances, it is not out of the question that the Swiss central bank would try and change its stance again and return to some kind of pegging of the currency. The message of the president of the SNB is an indication in that regard".

There are also analysts that don't subscribe to this theory, and they stress that setting a peg once again would mean the Swiss Central Bank buying Swiss francs heavily. "All of this precisely because it dropped the imposed peg", the quoted sources are saying.

The message of the president of the SNB is an internal one, addressed to exporters, it is not a foreign message, says CFA economist Adrian Mitroi, who told us: "The statements made by Jordan show that the regime applied by the central bank so far, by which it was supporting the depreciation of the CHF, will end. The SNB doesn't have that much power anymore. Perhaps the market forces will be more important now".

Switzerland's case is a special one, Mr. Mitroi warns, and he states that the position which the SNB took last year, has brought heavy losses to the Swiss economy, not to mention the losses posted by the bank itself.

"With such a balance sheet, the SNB should have normally had a devalued currency, which hasn't happened, because it is a haven currency. This is a textbook example, because the policy of the central bank changes depending on the competitors' game.

Switzerland operates according to other patterns - their democracy is singular. The SNB is a central bank that has a far more democratic position than others".

On January 15th, 2015, the SNB decided to scrap the minimum threshold of 1.2 CHF/Euro imposed for the exchange rate in September 2011. Following the announcement about its scrapping, the Swiss franc gained approximately 40% against the Euro and the dollar. This development affected the country's exports, which became more expensive for foreign buyers.

According to an analysis made by Switzerland Global Enterprise, Swiss companies focused on exports have struggled to remain competitive after the elimination of the exchange rate peg.

The move in Switzerland has also affected the RON /CHF exchange rate, as the Swiss franc saw a massive gain against the leu.

Under these circumstances, most of the people who borrowed in Swiss francs have found themselves unable to make their monthly loan repayments. Debtors have been asking from the very beginning for a law on the conversion of Swiss franc loans to lei at a discount. Such a draft law has been under discussion in the Parliament since back in 2014.

Some experts warn, however, that if CHF loans were converted to lei now, then the borrowers could face a new crisis some time from now. This could happen if the Swiss franc were to weaken, and the reference interest rate for loans denominated in lei - ROBOR - will rise, which is what most economists predictability will happen.

Aurelian Dochia said: "It is not a matter of whether the ROBOR rises, because that will certainly happen, and it won't be long before it does. The question is when exactly are we going to see an upward evolution of the policy rate. Some hints in that regard have already appeared, capital has begun migrating from emerging countries to developed ones, which may happen in Romania as well, which makes capital more expensive, in other words leading to the hike of the ROBOR".

The ROBOR rate is currently at an all time low: less than 1.5% a year.