Germany, France Back Swiss Central Banker in G-20 Regulatory Role: Report

German Chancellor Angela Merkel and French President Nicolas Sarkozy are backing the candidacy of the head of Switzerland's central bank to lead the Financial Stability Board, a newspaper reported Sunday.

The FSB, the Group of 20's regulatory task force, is charged with making sure bank regulations are strong enough to prevent another financial crisis.

It has been headed by Mario Draghi, who will take over as European Central Bank president on Tuesday. Swiss National Bank Chairman Philipp Hildebrand and Bank of Canada Governor Mark Carney are vying for the job.

Heading the FSB would not require the incumbent to give up his central-bank governorship. An announcement about the position is expected at the G-20 summit on Nov. 3-4.

Citing a source familiar with the election process, the Swiss paper SonntagsZeitung said Merkel favored Hildebrand and also convinced Sarkozy to back him. In exchange, Switzerland previously had to support Christine Lagarde as head of the International Monetary Fund, the paper said.

Hildebrand has been a vocal proponent of tougher bank regulation after the Swiss government had to bail out flagship bank UBS during the financial crisis. His credentials to chair the FSB have been boosted by Switzerland's enacting of bank regulation stiffer than the new Basel III global rules.

Hildebrand and Carney are good friends and studied together at Oxford.

The SonntagsZeitung also reported that at a recent FSB meeting in Zurich, the idea of appointing one of the two as head of the FSB and naming the other as his deputy surfaced.

The Swiss government is quietly backing Hildebrand's candidature for the FSB, though some right-wing politicians oppose it, the paper also said.

Of course the federal council supports SNB Chairman Philipp Hildebrand's candidature for the top job at the FSB, Finance Minister Eveline-Widmer Schlumpf told the SonntagsZeitung.

But the government was doing this via diplomatic channels and not publicly, the paper also quoted her as saying.

Yet a member of the right-wing, European Union-skeptic Swiss People's Party (SVP) said he was against having the Swiss central bank headed by a top international regulator.

Conflicts of interests will occur, SVP parliamentarian Christoph Moergeli said, adding that the SNB head should focus on Switzerland's interests and not pursue a parallel agenda.

Hildebrand has come into the crosshairs of the SVP before.

Party mastermind Christoph Blocher has called on Hildebrand to resign after the SNB posted its biggest annual loss ever last year due to currency interventions to weaken the Swiss franc.

(Reporting by Catherine Bosley; Editing by Helen Massy-Beresford)