Federal councilor Aymo Brunetti: "I see clear indications for a bubble" – Switzerland

Aymo Brunetti, what went through you when you heard about the resignation of your former boss, Johann Schneider-Ammann?

Aymo Brunetti: I was not surprised – the newspapers had already announced this for quite some time.

Is it an advantage if the minister of economy comes from the economy?

Of course it is a big advantage if he understands something about the business and knows the challenges and problems of the companies. But it makes a big difference whether you run a business or regulate an economy. You see that in the current American president.


Understanding macroeconomic relationships and running a business are two completely different things, especially in the area of ​​activism. In a company you usually have to do something immediately as soon as a problem occurs. You are expected to stand there and decide something concrete. In economic policy, on the other hand, a firm hand is often the best – that one does not immediately plan an intervention for every small thing.

Is the best Minister of Economy who does nothing?

That sounds a bit derogatory. But the hardest part is to explain why you still have to let certain things go. Why a large part of rapid and visible intervention is ultimately activism and worsens the situation. It is a lot easier to do something. A minister of economics deserves a lot of praise if he does not immediately want to implement an alleged solution to every problem.

About the financial crisis: is my money in the bank safer today than it was ten years ago?

Your money was relatively safe ten years ago, because we have deposit insurance in Switzerland. So unless the entire system collapsed at the same time, it was covered to some extent. What is certainly safer: the banks nowadays have much more protection against fire.

That means?

They have a higher capital ratio, more liquidity and better, ie clearer, loss-making capital. Banks can now suffer greater losses than before the financial crisis. In addition, the too-big-to-fail problem was significantly reduced. Not only with higher capital requirements, but now you have a plan, what happens when a big bank dies. This means that the financial sector is only clearly more stable than it was then.


The problem is the drugs used against the crisis, in particular the liquidity pumped into the system. Monetary policy is still so expansive that prices are exaggerated in virtually all asset classes. If monetary policy normalizes, this could lead to a collapse of equity markets, real estate markets and bond markets. Hopefully the banks are stable enough to earn a lot of money. However, there are certainly significant losses for property owners, such as pension funds or private individuals.

Are you expecting a crisis?

Recognizing a bell is very difficult. But I see clear evidence for it.

What are the biggest risks in the financial system?

As I said, monetary policy has become as extensive since the financial crisis as never before in history. It was a good idea at the time, but it has not been solved yet. The US is starting to slow down, but the European Central Bank (ECB) is happily continuing. That is why Switzerland can not normalize. The enormous liquidity has not yet triggered inflation because banks hold some as surplus reserves or because money flows to assets rather than to normal loans; otherwise we would already have very high inflation.

Can a large bank go bankrupt today without the state and the taxpayer having to intervene?

That is the goal of the too-big-to-fail scheme. However, until the end of 2019, the emergency plans do not have to be approved by the Finma. Only then can you say that you can let a big bank die without the intervention of the state.

Was the rescue of UBS 2008 really necessary?

In my opinion though. Of course you can say that at the time of the rescue the bank was still solvent. But she would have had to survive at least one or two months of turbulence and loss of capital and liquidity. I miss the belief that that would have been possible. It was therefore, in my opinion, a right action at the right time.

How can the euro crisis be overcome?

After all, since the start of the euro crisis, a common banking supervision and a bank stabilization fund have been set up. That was an important step. It was a completely absurd failure to pursue a single monetary policy, but not to supervise European banks. This has now been made good. But the euro crisis is in no way really mastered because the fundamental construction problems of the euro have not yet been tackled.

They have addressed the need to find a way out of an ultra-expansive monetary policy. Should the ECB start?

Especially from the Swiss point of view. We are in a corset. The smallest negative news from the euro zone immediately causes upward pressure on the franc. If Switzerland could only search for itself, it could start normalizing for the first time. So we can only hope and wait until the ECB finally takes a step towards a tightening of monetary policy.

Could not Switzerland reverse at least the negative interest rates?

Every step of the negative interest rate makes the franc more attractive. Negative interest rates are obviously unsympathetic. But I understand that the National Bank wants to maintain an interest rate differential with the ECB in the current situation.

That is, it can quickly become dramatic if the National Bank raises interest rates?

That could cause a strong boost in valuation.

The National Bank can create and intervene unlimited money. The result, however, is an enormously inflated balance sheet total. Do not you worry about that?

In my opinion, there is no real size of the balance sheet of a central bank. Of course, with a large balance, it is more difficult to pursue monetary policy. The smallest price changes cause big profits and losses. These are actually irrelevant to monetary policy.

But they cause a craving for politicians.

This is a consequence that makes me nervous. More and more people, including those who claim otherwise in an economically justified way, say that these foreign currencies must be used to set up a sovereign wealth fund or similar structure. But all that in that direction means that politicians begin to determine what happens to the balance of the SNB. I would think back to this intervention in the urgently needed independence of monetary policy, as the devil does holy water.

Do not you think that the political pressure increases as the situation lasts longer and the balance continues to grow?

That's right. It would be best if you could reduce the balance. But without taking appropriate steps in the euro zone, this would have the same effect as an interest rate hike and the franc would immediately come under appreciation pressure.

Would that be so bad? Can the economy not live at a rate of 1.10 francs?

A rate of 1.10 franc would not worry me much. In the event of uncertainty, the exchange rate of the euro may suddenly fall to parity or more very quickly. That would be very problematic. Then we would soon be back in the situation of summer 2011.

How dangerous is the situation in the real estate market?

This is a result of the abundance of liquidity. The SNB is explicit about the dangers, especially on the market for investment property.

So there is a risk of a crash in prices for apartment buildings?

Precisely because there are significant risks of loss in the banking sector, which could endanger financial stability. Again, it would be best to normalize interest rates. Then it would not come to these excesses. Because the National Bank can not continue, it currently only has the opportunity to repeatedly point out these dangers or, if necessary, to request a further increase of the countercyclical capital buffer.

Has the financial crisis led to over-regulation?

Certainly, the regulations have been considerably extended since the beginning of the financial crisis. On the other hand, it is a mistake to believe that after such an accident, which has clearly happened in the financial sector, there are no strong attempts to contain it. The need for additional regulations in the financial sector is undisputed. It is also certain that you always have to look for ways to do better. On the other hand, I do not understand the criticism that the te-big-to-fail regulation goes too far.

You mean the requirement of a relaxation of the regulations for systemically important large banks.

I recognize that the banks have done a lot. But with the square that we have with our large-scale banks in Switzerland in relation to GDP, it is clear to me that we must remain at the top of global regulation. What you can discuss is whether the many new rules on customer protection can not be simplified.

They preside over the Advisory Council for the future financial center of Switzerland, which makes recommendations to the Federal Council. What happened recently?

On the one hand, it was the recommendation to set up a financial market-specific crisis organization with regard to cyber risk & # 39; s. The federal council is currently investigating this. A second recommendation from the spring of this year has so far received relatively little attention from the public.

What is it?

To the Council, with a rapid reform of the withholding tax to give the highly underdeveloped capital market impulses. After renouncing the review of fiscal criminal law and withdrawing the Matter initiative, which wanted to embed domestic banking secrecy into the constitution, now would be the right time to tackle the reform. The Council unanimously recommends that the withholding tax should be redesigned as paying agency tax, that it should be tailored to all resident individuals, but that domestic institutional investors and foreign investors should be exempted.

Is the trade war of US President Donald Trump a threat to the world economy?

Absolutely. It is very scary what started here. Ironically, the Americans, who until now – whether they are Democrats or Republicans – have a basic consensus on a multilateral world order, now the driving forces behind rough protectionism. Kruder does not work anymore. You see, the American president seems to have no idea of ​​the economy. That he only thinks of the steelworkers in a certain factory and does not even see what his decisions mean for other sectors of the economy.

Does his understanding of relationships simply disappear?

Of course, the decisions can be sold populistically. The general economy, however, has no face, the people who should benefit from the rates. That is why it is important to have certain principles. And that is why it is so dangerous to say goodbye to these principles. The problem is that the trade dispute is runaway and involves more and more sectors. I never thought that the US would take such measures. The president is now doing this with great enthusiasm and is still convinced that this is correct. The major costs only become visible after two to three years.

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