You Can't Legislate Morality

So Philipp Hildebrand has quit. Not that he did anything wrong, of course. Hildebrand said "I came to the conclusion that it’s not possible for me to deliver a definite proof that my wife requested the currency transaction without my knowledge. Unfortunately, mistakes were made around this transaction.”

The only problem is that he can’t prove he didn’t do anything wrong! The Swiss National Bank released a series of emails between Hidlebrand and his banker. Here’s the Bank Sarasin guy’s email on 16 August:

I also remember your saying in our yesterday’s conversation that if Kashya [Hildebrand's wife] wants to increase the USD exposure then it is fine with you.

The SNB’s own investigation concluded that Hildebrand didn’t break any of the central bank’s internal rules or policies. They must be some pretty loose rules. In any case, it’s not the rules that are the problem. Too many participants in the finance industry see it as one giant game of Monopoly. The rules are there, and your aim is to maximise your profit within those rules, irrespective of the consequences. Then they wonder why the general public hates them when the whole system comes crashing down.

The Economist’s Shumpeter says the SNB’s code of ethics needs an update. That won’t make much difference. Instead of trying to rein in employees with 100-page codes of ethics, the finance industry should  try employing ethical people to begin with. You can't legislate morality.

Postscript: Here's the SNB press release, including the relevant emails. He was also buying Roche and Nestle, presumably without the same foresight.