ZURICH, Feb 16 (Reuters) - Switzerland may face a deeper recession than the Swiss National Bank has forecast in December, SNB board member Thomas Jordan said in a television interview on Monday.
The SNB forecast in December that the economy will shrink by up to 1 percent in 2009, Jordan told Swiss television channel SF 1.
'In the meantime, we have had a lot of fresh negative news. That indicates that the forecast may have to be revised down and the recession may last longer,' he said.
The SNB will give an update on its growth forecast at its next policy meeting in March, he said.
The SNB has slashed its target for the 3-month Swiss franc LIBOR aggressively to just 0.5 percent and officials have said it may use unconventional means such as market interventions to support the economy should the country face deflation
In January, Switzerland's leading economic indicator, the KOF growth barometer, hit the lowest level since its launch in 1991 and the Purchasing Managers' Index (PMI) also pointed to a sharp recession in the manufacturing sector.
Jordan said while credit conditions were set to tighten in a recession, Switzerland did not suffer from a general lack of credit supply.
'The situation in Switzerland is very good by international comparison,' Jordan said. 'Most companies can extend their credit or get new credit from banks or the market.
'We have no credit crunch in Switzerland at the moment,' Jordan said.
But the central bank continued to work on deals to get liquidity from cash-rich smaller and regional banks to the country's two large banks, UBS and Credit Suisse , which have been hard hit by the financial crisis.
'We are looking to use the same instrument we used before Christmas for more such deals and we hope that we can have the next deal in March,' Jordan said.
Before Christmas, the SNB brokered a deal between three local banks and UBS.
UBS issued a 2 billion Swiss franc covered bond, which state-owned Zuercher Kantonalbank, Postfinance and cooperative Raiffeisen group underwrote to provide UBS with liquidity.
'We hope that this instrument can be used for larger transactions,' Jordan said, when asked whether future deals may be larger than 2 billion francs.
The instrument was open to both large banks, Jordan said.
The central bank could theoretically also buy corporate bonds, Jordan said. 'We would use this not to finance the companies but to lower interest rates in the segment to make refinancing cheaper in general,' Jordan said.
(Reporting by Sven Egenter; Editing by Christian Wiessner)
((sven-markus.egenter@reuters.com; +41 58 306 7351; Reuters Messaging: sven-markus.egenter.reuters.com@reuters.net)) Keywords: SWISS SNB/ (For help: Click 'Contact Us' in your desk top, click here or call 1-800-738-8377 for Reuters Products and 1-888-463-3383 for Thomson products; For client training: training.americas@thomsonreuters.com; +1 646-223-5546) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The SNB forecast in December that the economy will shrink by up to 1 percent in 2009, Jordan told Swiss television channel SF 1.
'In the meantime, we have had a lot of fresh negative news. That indicates that the forecast may have to be revised down and the recession may last longer,' he said.
The SNB will give an update on its growth forecast at its next policy meeting in March, he said.
The SNB has slashed its target for the 3-month Swiss franc LIBOR aggressively to just 0.5 percent and officials have said it may use unconventional means such as market interventions to support the economy should the country face deflation
In January, Switzerland's leading economic indicator, the KOF growth barometer, hit the lowest level since its launch in 1991 and the Purchasing Managers' Index (PMI) also pointed to a sharp recession in the manufacturing sector.
Jordan said while credit conditions were set to tighten in a recession, Switzerland did not suffer from a general lack of credit supply.
'The situation in Switzerland is very good by international comparison,' Jordan said. 'Most companies can extend their credit or get new credit from banks or the market.
'We have no credit crunch in Switzerland at the moment,' Jordan said.
But the central bank continued to work on deals to get liquidity from cash-rich smaller and regional banks to the country's two large banks, UBS and Credit Suisse , which have been hard hit by the financial crisis.
'We are looking to use the same instrument we used before Christmas for more such deals and we hope that we can have the next deal in March,' Jordan said.
Before Christmas, the SNB brokered a deal between three local banks and UBS.
UBS issued a 2 billion Swiss franc covered bond, which state-owned Zuercher Kantonalbank, Postfinance and cooperative Raiffeisen group underwrote to provide UBS with liquidity.
'We hope that this instrument can be used for larger transactions,' Jordan said, when asked whether future deals may be larger than 2 billion francs.
The instrument was open to both large banks, Jordan said.
The central bank could theoretically also buy corporate bonds, Jordan said. 'We would use this not to finance the companies but to lower interest rates in the segment to make refinancing cheaper in general,' Jordan said.
(Reporting by Sven Egenter; Editing by Christian Wiessner)
((sven-markus.egenter@reuters.com; +41 58 306 7351; Reuters Messaging: sven-markus.egenter.reuters.com@reuters.net)) Keywords: SWISS SNB/ (For help: Click 'Contact Us' in your desk top, click here or call 1-800-738-8377 for Reuters Products and 1-888-463-3383 for Thomson products; For client training: training.americas@thomsonreuters.com; +1 646-223-5546) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.