UBS’s Weber Defends SNB Decision to Abandon Cap on Franc

(Bloomberg) — UBS Group AG Chairman Axel Weber said the Swiss central bank “did the right thing” in scrapping its currency cap, a move that sent shockwaves through markets last week.

“Better an end with a shock, than shocks with no end,” Weber, the former president of Germany’s Bundesbank, said Wednesday in a panel discussion at the World Economic Forum in Davos.

The Swiss franc soared as much as 41 percent against the euro and strengthened against other currencies after the Swiss National Bank abandoned the three-year-old policy on Jan. 15. Weber said it was clear to him that the cap on the franc would be temporary and that the end to the policy would be “unexpected.”

Weber, 57, expects the Swiss economy to be able to manage the challenges and move to “normality.”

“There will be a big impact on the Swiss economy this year. There will be, I think, at least some reversal of this overshooting that we’ve seen in the markets,” he said. “So I’m quite confident that once the dust settles, we’re moving back to more normality with a more normal exchange rate regime for Switzerland.”

Related News and Information: Top Finance Stories: FTOP Top European Stories: TOPE

–With assistance from Michael J. Moore in New York.

To contact the reporters on this story: Elena Logutenkova in Zurich at [e-mail]; Simon Kennedy in London at [e-mail] To contact the editors responsible for this story: Elisa Martinuzzi at [e-mail] Cindy Roberts, Jon Menon