Thomas Jordan is to leave his post at the head of the Swiss National Bank after 12 years, ending an era in which Swiss monetary policy was the subject of something approaching awe around the globe.  

“Having met the various challenges of recent years, now is the right time for me to step down,” Jordan said in a statement on Friday. He will leave in September, having previously planned to stay on until 2027.

Almost inevitably, he leaves on a high, having overcome the worst bout of global inflation in 40 years. Whereas inflation surged into double-digits in the surrounding eurozone and in the U.K., it peaked at 3.5 percent in Switzerland and is now running at a tame 1.3 percent. Financial markets are already betting on it cutting rates this month, three months earlier than the ECB.

That is "tantamount to success," said Bartosz Sawicki, an analyst with Polish fintech Conotoxia.

Yet Jordan had spent the first half of his stewardship fending off a very different threat.

From 2011, a flood of "safe haven" flows out of euros threatened to drive the franc to a level that would have killed the country's exporters and tourism business. Jordan was part of a team that introduced a "floor" for the euro, preventing the franc from appreciating too much.

But when the European Central Bank signalled in 2014 it would begin quantitative easing, Jordan, now governor, realized that the floor would have to go. On a dramatic January morning in 2015, the franc surged nearly 30 percent, briefly terrifying financial markets — and exporters. But the currency ultimately remained stable. "There were some negative impacts at the beginning," said UBS Chief Economist Alessandro Bee,"but Switzerland didn't plunge into recession."

The upshot of that episode was Jordan's pioneering policy to keep the franc from becoming too strong, a policy that influenced central banks globally for the next seven years. "The SNB was the first central bank willing to go deep into negative territory with interest rates," said Bee. "It was uncharted territory." 

It has been Jordan's strategy that has seen the SNB recycle an ever-growing stash of foreign reserves not just into risk-free assets, but also into equities, which now account for around 20 percent of its portfolio. That has created a huge capital cushion with which to absorb the losses that the SNB and other central banks are now making on their monetary policy operations.

Missteps in management

While his guidance of monetary policy has been widely praised, Jordan attracted criticism for his direction of the SNB in recent years. Critics point to his handling of the collapse of Credit Suisse last year, which they saw as the side-effect of a sometimes opaque and authoritarian approach to governance.

Yvan Lengwiler, a professor of finance at the University of Basel, said part of the reason for that bank’s collapse was Jordan’s “conservative” approach to providing emergency liquidity, seeing him as reluctant to provide an emergency backstop for banks. In the end, the SNB wound up having to provide over 100 billion francs in emergency liquidity to rival UBS to smooth a hastily arranged takeover.

And while Jordan may appear to be handing over at an opportune time, with inflation clearly on the decline, his timing nonetheless creates a problem with regard to succession. The SNB only has a board of three. Of the two other board members Antoine Martin only joined the board this year, while Martin Schlegel has only been in his position for a little over a year.

As such, said one former central banker, granted anonymity, a figure from the private sector or the Treasury might be better suited as successor.

Either way, the person said, “Monetary policy will not be affected by the change. While Jordan is very capable, the SNB has a strong staff which has price stability in its blood."