Global Courant 2023-04-28 10:07:02
The Swiss National Bank has come under the spotlight following its assistance in UBS’ takeover of Credit Suisse.
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The Swiss National Bank will hold its annual general meeting in Bern on Friday amid protests against its action on climate change and its role in the emergency sale of Credit Switzerland to Swiss rival UBS.
The central bank played a key role in brokering the bailout of Credit Suisse during a chaotic weekend in March when a flight of deposits and the plummeting share price pushed the 167-year-old institution to the brink of collapse.
The deal remains mired in controversy and legal challenges, particularly over the lack of investor input and the unconventional decision to wipe out 15 billion Swiss francs ($16.8 billion) in Credit Suisse AT1 bonds.
The collapse of the country’s second-largest bank sparked widespread discontent and seriously damaged Switzerland’s long-standing reputation for financial stability. It also came against a feverish political backdrop, with federal elections in October.
While the SNB will no doubt face questions and grievances from shareholders about Credit Suisse’s plight on Friday, the country’s network of climate activists will also try to use the central bank’s unwanted spotlight to challenge its investment policies.
Unlike many major central banks, the SNB operates a publicly traded company, with just over half of its roughly 25 million Swiss francs ($28.1 million) share capital held by public shareholders – including several Swiss cantons (states). and cantonal banks – while the remaining shares are held by private investors.
A shareholder walks past a giant inflated ball boom during a protest by climate activists ahead of UBS bank’s general meeting of shareholders in Basel on April 5, 2023, following UBS’ acquisition of Credit Suisse that was hastily arranged by the government on March 19. Swiss government to prevent financial crisis. (Photo by Fabrice COFFRINI / AFP) (Photo by FABRICE COFFRINI/AFP via Getty Images)
Fabrice Cofrini | Afp | Getty Images
More than 170 climate activists have now bought an SNB share, according to the SNB Coalition, a dedicated pressure group that grew out of Alliance Climatique Suisse – an umbrella organization representing about 140 Swiss environmental campaign groups.
About 50 of the activist shareholders will be in attendance Friday, and activists plan to deliver about a dozen speeches on stage at the AGM, climate activist Jonas Kampus told CNBC on Wednesday. Protests will also be held outside the event.
The group calls on the SNB to divest its shareholdings of “companies that cause serious environmental damage and/or violate fundamental human rights”, pointing to the central bank’s own investment guidelines.
In particular, activists have pointed to SNB’s interests in Chevron, Shell, TotalEnergies, ExxonMobil, Repsol, Enbridge and Duke Energy.
Members of a Ugandan community object TotalEnergies’ East African crude oil pipelinewill also be present on Friday, and one of them plans to speak directly to the SNB executive on stage.
In addition to a complete halt to fossil fuel investment, activists are demanding that the SNB implement the “one by one rule” – a capital requirement designed to prevent banks and insurers from profiting from activities detrimental to the transition to net zero.
In this context, the SNB would be required to set aside one Swiss franc of its own resources to cover potential losses for each franc allocated to funding new fossil fuel exploration or extraction.
Ahead of the AGM, the central bank declined on legal grounds to file three of the activists’ motions and said Wednesday it would not comment on protest plans but would direct CNBC to its formal agenda. Still, Kampus suggested that only the process of filing the motions itself had contributed to increased public and political awareness of the issues.
“There is public pressure from all sides and also political pressure for the SNB to change things. Right now the SNB is really way behind compared to other central banks,” Kampus told CNBC over the phone. adding that the SNB has a “very conservative view” on its mandate regarding price stability and financial stability, which is “very limited”.
The shareholders’ case is also supported by a motion in parliament, with support from lawmakers ranging from the Green Party to the Center (centre-right party), demanding an expansion of the SNB’s mandate to cover climate and environmental risks.
“While other central banks around the world go far beyond the steps the SNB has taken in this regard, the SNB has repeatedly taken the position that its mandate does not give it enough leeway to fully factor climate risk into its decisions. and monetary policy tools,” reads the motion, tabled on March 16 by Green Party legislator Delphine Klopfenstein Broggini.
“The current parliamentary initiative is intended to guarantee that room for maneuver and to make it clear that the SNB must take climate risks into account when conducting monetary policy.”
The motion states that climate risks are “classified globally as significant financial risks that could jeopardize financial and price stability”, and concludes that it is in “Switzerland’s public interest for the SNB to proactively address these issues”, as other central banks are trying to to do.
Kampus and his fellow activists hope the national focus on the SNB following the Credit Suisse crisis provides fertile ground for concerns about climate risks, which he says pose a risk to the financial system “several times greater” than the potential consequences of Credit Suisse. Suisse’s collapse.
“We think there’s also an opportunity on the SNB side in that they might be a little more humble this time around, as they obviously got some things wrong in terms of the Credit Suisse crash as well,” Kampus said.
He noted that the central bank has always maintained that climate risk has been factored into its models and that there was “no need for any further exchange with the public about further transparency”.
“Very central to the work of the SNB is that the public just has to trust them. Trust is something that is very important to the central bank, and to demand trust from the public without leading or supporting it with further evidence we being able to trust them in the long run is pretty scary, especially if we don’t know what their climate model is,” he said.
The SNB has long argued that its passive investment strategy, which invests in global indices, is part of its mandate to remain market neutral, and that it is not up to the central bank to implement climate policy. Activists hope mounting political pressure will eventually force a legislative change to broaden the SNB’s mandate to accommodate climate and human rights as risks to financial and price stability.
UBS and Credit Suisse also faced protests from climate activists at their respective AGMs over investments in fossil fuel companies earlier this month.
