Wife of toppled Swiss bank chief was "risk-taker"

It was at hedge fund Moore Capital in New York that she first made a name for herself and met future husband Philipp Hildebrand, who resigned on Monday as head of the Swiss central bank due to a lucrative currency trade Kashya made weeks before he imposed a curb on the value of the Swiss franc.

Hildebrand told a news conference that he decided to quit after weeks of media pressure because he realised he could not prove that he had no prior knowledge of the trade when his wife initiated it last August.

Very little is known about the 50-year-old woman at the heart of a scandal that has shaken Switzerland, raised questions about its sacred bank secrecy and pushed out its slick young bank governor at a critical time for the country.

But Reuters was able to piece together a picture by talking to several people who know her well, including her brother and several artists who have worked with her.

Kashya's brother Daneyal Mahmood, a gallery owner who lives in New York, uses words like "fearless" to describe his sister, who studied economics at Boston College before moving to New York.

"She was a good student, but I would not say exceptional. Kashya is far more pragmatic and action-oriented. Kashya's genius emerges when you let her loose in the world. I would definitely describe her as a self-made woman," Mahmood told Reuters.

People who have worked with her gallery are full of praise for her drive and willingness to "follow her gut" on artists who might not seem commercially viable.

"She is quite bold, taking on things that others might shy away from," said Gabrielle Senza, who worked with Kashya in 2006. "She's willing to take that risk."

It was this strong-willed, independent streak which may have been behind the currency trade that backfired so badly on her and her 48-year old husband.

Philipp Hildebrand himself touched on this at a news conference last week at which he denied any wrongdoing and vowed to stay in his post.

"We married relatively late, and from the beginning our marriage has always been, how shall I put it ... Well, let's say my wife is a strong personality," said Hildebrand.

"FELT GOOD"

Kashya herself told Swiss television that she "felt good" about the trade, in which she used 400,000 Swiss francs to buy dollars because she believed at the time the dollar was "ridiculously cheap".

She seems to have been oblivious to the fact that the transaction might compromise her husband, who as central bank governor was privy to confidential market-relevant information.

Hildebrand said he learned of the purchase a day later, and auditor PriceWaterhouseCoopers said Hildebrand informed the couple's bank, Sarasin, that future deals would require his approval.

For good measure, he copied in the SNB's compliance department, which ruled on Sept. 7 that there should be no repeat of such trades. A day earlier, Hildebrand announced a cap on the Swiss franc, which had surged on fears over the euro zone debt crisis and economic threats outside Europe.

Kashya sold dollars for francs on Oct. 4, by which time the U.S. currency had rebounded substantially against the franc.

Daneyal says his sister takes after their mother, Katharine Shepard Salter, an American from Wisconsin who loved to travel and settled in Pakistan after meeting her husband, a colonel in the army.

After their father died in a car accident in 1967, her mother moved the family from Rawalpindi, a dusty, bustling city near the capital Islamabad, to suburban Connecticut.

Kashya graduated from Boston College in 1983 and moved to New York, where at first she did menial temp work while living above a fish market in the Hell's Kitchen area of Manhattan, her brother recalled.

LOVED THE PACE

Eventually she signed up with Moore Capital, a new hedge fund. She stayed there for 16 years, meeting Hildebrand after he joined in 1995.

"She had a research position and worked all night until dawn keeping an eye on what was going on in the international markets," Mahmood said. "She loved the pace and the people at Moore Capital."

The couple moved from London to Switzerland after Kashya became pregnant, and their daughter was born in 2000.

The following year, Kashya opened her first gallery in Geneva, where Hildebrand was working for Union Bank Privee, before expanding in 2003 with a space in New York.

After Hildebrand joined the Swiss National Bank in 2003, Kashya moved her gallery to Zurich and built up a reputation for fostering emerging talent, particularly from the Middle East and Asia.

After taking over as SNB president two years ago, Hildebrand hung a large painting of grey and brown stooped figures by Tianbing Li, a Chinese artist represented by his wife's gallery, in his office.

"The art world intrigued me," Kashya once told art magazine Canvas. "Given my success with my former career on Wall Street, I had enormous enthusiasm, self confidence and ambition and felt that this new aspiration was realistic."

On Monday, following the resignation of her husband, she struck a more somber tone, apologising to the Swiss people, the central bank and to her husband for what she called an "error in judgement".

"I am deeply remorseful for my own behaviour and my lack of recognition for its ramifications," she said. "I have an infinite respect for the institution and this wonderful country and am deeply sorry for the distraction and agitation I have caused." (Reporting by Katie Reid in Zurich and Tim McLaughlin in Boston; Additional reporting by Catherine Bosley in Zurich and Martina Fuchs in Dubai; Writing by Noah Barkin and Emma Thomasson; Editing by Hugh Lawson)

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PROFILE-Philipp Hildebrand's very Swiss finish

The 48-year-old former hedge fund manager's two-year chairmanship of the Swiss National Bank was rocky at best. He had faced down calls to go after he ran up record losses in 2010 to try to halt the rise of the Swiss franc, an effort which cost the central bank 26.5 billion francs.

His fortunes seemed to have turned last September when the SNB successfully set a cap on the soaring Swiss franc at 1.20 per euro. But it emerged last month that Hildebrand's wife Kashya, a former hedge fund trader who now runs a Zurich art gallery, had bought 400,000 Swiss francs worth of dollars three weeks before her husband oversaw those steps.

Hildebrand said he only learned of the trade the following day, rejecting claims that he had personally authorised the currency deal, which made a sizeable profit. But he told a media conference on Monday he could not provide final evidence that he had been unaware of the trade and had decided to step down to protect the credibility of the Swiss bank.

"I am sad to take this step, I loved this job, I fought like a lion for it," he said.

Hildebrand faced vociferous opposition to his tenure, driven mainly by Christoph Blocher, mastermind of the right-wing Swiss People's Party (SVP). Last year Blocher accused the SNB under Hildebrand of "megalomania or incompetence" for his attempts in 2010 to stop the franc's rise.

Besides the franc, the Swiss central banker was ambitious in his plans to make Swiss banks safer, pushing for particularly exacting new rules, which would go further than most other countries in Europe and the United States. Such plans for banks like UBS and Credit Suisse made him enemies at home.

At his farewell press conference on Monday, he said he was proud of what he had achieved, noting he had spoken out strongly and early in favour of the tough capital rules. "If you want to make enemies, try to change something," he said, quoting former U.S. President Woodrow Wilson.

Internationally, he was building an image as a trail-blazing regulator, only in November being appointed to the vice chairman of the Financial Stability Board, a post he will also relinquish.

"We all know that he is a man of total integrity, extraordinary ability and, most important of all, courage. Such people are rare. His country will miss him," Bank of England Governor Mervyn King said in a statement.

MARKET FORCES

When Hildebrand took over at the helm of the SNB in January 2010 after seven years as a board member, he was the youngest president in the history of the century-old bank. Born in the Swiss capital of Bern, he had studied -- mostly politics and international relations -- in Toronto, Florence, Harvard and Oxford.

Though he was no economist, Hildebrand knew the territory. His first real job had been with the World Economic Forum in Geneva, organising speakers from the financial services industry for its annual talkfest at Davos. They included George Soros, who had made his fortune betting against the Bank of England, and who helped him get a position at New York-based hedge fund Moore Capital Management, which specialised in speculating on interest rate futures and monetary policy.

As a young hedge fund manager, Hildebrand had in 1996 written a letter to influential Swiss newspaper Finanz und Wirtschaft, demanding that the SNB intervene to weaken an overvalued franc. "The markets are powerful but they often also allow themselves to be led," he asserted at the time.

He learned the value of perseverance at an early age, when as a freestyle swimming champ he narrowly missed qualifying for the 1984 Olympics. Swimming is a very good learning process for life, points out his former coach Anthony Ulrich. "It's an endurance-oriented sport," he says. "You learn to lose and keep your head above water at the same time."

Scarcely had Hildebrand settled into his new office at the edge of Lake Zurich -- hanging a favourite black and white photo of childhood idol Mohammed Ali on the wall -- when he was called into action. With the franc soaring again during the euro zone debt crisis, to around 1.4 per euro, Hildebrand ordered another round of massive interventions. Between February and May 2010, the SNB bought 147 billion francs in foreign currency, about a quarter of Swiss GDP.

AMBITIONS

The SNB is not the only central bank to have the problem of a strengthening currency. The combined firepower of the Group of Seven rich nations did succeed in stabilising financial markets in March, when their first joint intervention since 2000 stemmed a sharp rise in the yen in the wake of Japan's earthquake.

But Hildebrand had no such support. Switzerland's right wing said the government should have been more wary of appointing a former hedge fund manager with no qualifications in economics. After he stopped intervening, investors on world markets pushed the franc even higher. It hit a new record at almost parity with the euro last August before the bank set the cap, which has not been breached.

The success of that move put the Swiss People's Party on the back foot. In October, Blocher's party fared poorly in elections. It November it was tipped off about Kaysha's trades.

The currency struggle was just part of Hildebrand's ambitions. His 2010 forex intervention involved nearly a quarter of the country's GDP, but the risk posed by Swiss banks is much greater - their assets amount to at least six times the country's economy.

Hildebrand, who is credited with playing a central role in saving UBS from collapse at the height of the crisis, pushed for new rules to go further than most, with UBS and Credit Suisse needing a capital buffer nearly three times bigger than their global rivals.

He has been praised by the likes of Paul Volcker and Timothy Geithner and, along with Britain's top financial regulator Adair Turner, is seen as an innovator. The banks say high capital cushions will be costly to maintain and crimp lending.

Besides the banks, Blocher's anti-immigrant, anti-European Union party, now the biggest in Switzerland, wants parliament to limit the SNB's powers beyond ensuring price stability.

"Mr Hildebrand is not your average central banker. He is a very activist, self-assured national banker ... Swiss politicians can be very small-minded so an international star generally doesn't go down so well," Peter V. Kunz, professor at the Institute for Economic Law at Bern University, said last year.

In 2010, Hildebrand was also the world's highest paid central banker on 833,000 francs, and is rarely seen in anything but an elegant navy blue suit and luxury Breguet watch. Having spent much of his early adult life outside Switzerland, he lacks political allies at home. His towering 1 metre 94 stature gives him an aloof air, and his push for stronger regulations has raised hackles among a cosy Swiss elite more used to backroom deals and a strict code of preserving client secrecy.

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