WASHINGTON (MNI) – Current financial market tensions underline the
importance of pursuing financial market reforms, including Basel III
rules, Swiss National Bank chairman Philipp Hildebrand said Saturday.

Speaking at a press briefing at the World Bank and IMF Annual
meetings, Hildebrand dismissed talk that current weak position of banks
may require postponing such reforms.

“Current circumstances and current experiences that we are going
through both in terms of financial stability and the economy underline
the necessity of reform and underline the urgency of completing the
reforms,” Hildebrand said. “That is the line of all the governors.”

Hildebrand also reiterated that the SNB will continue to pursue its
foreign exchange rate policy.

“We will continue to strictly pursue our minimum exchange rate
target,” he asserted. Hildebrand said the SNB’s decision to intervene in
the forex market has been met by understanding among colleagues at the
IMF.

Turning to the economic outlook, Hildebrand warned that downside
risks to the global economy have increased significantly and that urgent
action from Eurozone leaders is need to ensure the European debt crisis
will be contained.

“Global economy is in a dangerous phase. The key point is that the
European debt crisis has implications for the global system,” Hildebrand
said.

Risks of a negative feedback loop between the real economy and the
financial system have risen so that the global recovery is likely to be
weak, he warned.

“The downward risks increased significantly,” Hildebrand said,
citing a failure to contain the Eurozone debt crisis and a further
slowdown of U.S growth as the dominant concerns.

While the long-lasting crisis since the fall of Lehman may have
reduced fiscal flexibility and scope for political interventions, it has
not fully depleted them entirely, Hildebrand noted.

Hildebrand said he is “convinced that we can return to a path of
stability” if credible measures are taken rapidly, adding that he was
encouraged by pledges from European leaders to recapitalize banks if
needed and urged them to quickly implement decisions form the July 21
summit.

–Frankfurt newsroom +49 69 72 01 42; e-mail: jtreeck@marketnews.com

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