Six weeks after a fateful decision that blasted its currency skywards, Switzerland's central bank is coming under intense scrutiny, with critics calling for changes to its insular policy practices and century-old ownership structure.
The shock of the Jan. 15 move by the Swiss National Bank (SNB) to abandon the franc's three-year-old cap against the euro is still reverberating, with politicians stepping up their criticism as the economy falters.
With an election looming this year, the pressure is likely to grow. The Social Democratic Party (SP) is pushing for a parliamentary debate on the workings of the SNB and its tiny three-governor board, a structure it says has led to opaque decision-making. Lawmakers from the party came away dissatisfied from a rare meeting with one of the governors last week.
"It can't be that three people have more influence over a country's destiny than the government," Susanne Leutenegger Oberholzer, a Social Democrat lawmaker, told Reuters.
The move by the SP, which holds two seats on the seven-member council that governs Switzerland, is part of a wider backlash since the SNB move that sent the franc soaring against the euro, threatening an economy that relies heavily on exports to Europe.
A slump could further erode confidence in the SNB's ability to deliver on its mandate to ensure stable prices and, as it states on its website, an "appropriate environment for economic growth". The nominally independent bank may find it increasingly difficult to shut out the noise from Swiss politicians.
"The SNB will come under pressure to do everything it can to depreciate or stop the appreciation of the franc," said Thomas Straubhaar, an economics professor at Hamburg University. "However the options are very limited."
The SNB justified its decision by saying the ceiling on the currency, introduced at the height of the euro zone debt crisis in 2011 at a rate of 1.20 francs per euro, was unsustainable, especially as the European Central Bank (ECB) was about to unveil a trillion-euro bond-buying scheme that would push the euro lower.
Swiss media have praised the SNB for having the guts to make the controversial move. But the decision has also cast a harsh spotlight on the bank, three years after its previous chairman stepped down in a scandal over his wife's currency trades.
"OUT OF TOUCH"
One set of critics, including members of the SP party, has zeroed in on how the SNB takes its monetary policy decisions.
In the United States, the 12 members of the Federal Open Market Committee (FOMC), decide on monetary policy. At the Bank of England it is nine. And at the ECB 25, including the 19 national central bank heads of the euro zone, debate policy before decisions are made.
The SNB board is composed of just three governors, all with similar professional backgrounds, a setup that some fear precludes a rigorous exchange of views.
"The SNB must remain independent. But it should not make its decisions in an ivory tower, out of touch with reality," Nick Hayek, the head of Swiss watchmaker Swatch, said at the weekend.
Another group of critics say it is the ownership structure of the SNB, under which the Swiss cantons participate in the share capital and profits of the central bank, which is flawed.
Keeping the cap in place could have led to big losses on the SNB's balance sheet. This would normally not be a problem for a central bank, but in Switzerland it risked angering the cantons, whose budgets rely on SNB transfers, as well as members of the influential Swiss People's Party (SVP).
Earlier this month, leading economists Beatrice Weder di Mauro and Barry Eichengreen highlighted these pressures and denounced the removal of the cap as "entirely political", prompting a swift denial from SNB Chairman Thomas Jordan.
A better solution, the economists said, would have been to overhaul the century-old cantonal financing mechanism.
The wave of censure has come at a time when the SNB was already under fire for its communication strategy on the cap.
A little over a week before the move, Jordan himself had called it "absolutely central" to the SNB's policy. Abandoning it, and failing to put a substitute in place, was seen by some economists as bordering on reckless. To the critics, the SNB has given up the one effective policy tool it had, relinquishing responsibility for the economy.
Now Jordan and his two colleagues on the board have precious few options.
Data suggests they have continued to intervene in the markets to try to steer the franc to a manageable level. On Wednesday, one euro bought 1.077 Swiss francs, a more palatable rate than the 0.86 seen during frenzied trading on Jan. 15.
But early signs on the economy have not been good.
French engineering group Alstom recently decided to cut half the workforce, or 50-60 jobs, at its Neuhausen factory in Switzerland because of competitiveness concerns.
Smaller firms are slashing prices, demanding supplier discounts and seeking longer hours from employees. In December, Swiss economic institute KOF was predicting GDP growth of 1.9 percent this year. Now it expects a 0.5 percent drop.
In a bid to discourage investors from piling into the franc, the SNB has said it could take the interest rate it charges some banks for deposits even lower than the current -0.75 percent. But that could hit Swiss pension funds and banks, and lead savers to hoard cash, said Georg Rich, a former SNB chief economist.
The SP party is pushing for the reintroduction of a cap but few believe the SNB can afford another U-turn. In the end, the only real option may be to sit tight and hope an economic revival in Europe puts upward pressure on the euro.
"For me this is the only way the reputation of the Swiss National Bank would not be damaged further," said Arturo Bris, a professor of finance at the IMD business school.
(Reporting by Alice Baghdjian, Albert Schmieder, Oliver Hirt and Katharina Bart; Writing/Editing by Noah Barkin and Mark Trevelyan)