“Switzerland’s international financial center is dead”

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It’s been almost a week since the decision was made on the urgent merger of Switzerland’s two largest banks. Oswald Grübel (79) ran both Credit Suisse and UBS as boss. Blick met the banking legend at a Productivity Club event in Zurich where he was answering questions from young people. The death of traditional Credit Suisse touched his patriotic feelings.

Blick: Mr. Grübel, would you still like to be a banker today or are you glad you don’t?
Oswald Grubel: I still love being a banker, albeit for private reasons. My day begins by examining the world’s economic and political news. I like to learn how different countries make decisions.

Good morning my baby. I ask differently Would you like to be CEO of a large Swiss bank today?
If I were 20 years younger of course – I would love to! Banks are important, bankers perform an important function. And a well-paying job.

Bankers, once an honorary title, now have the worst possible image. They became the embodiment of robbery. Does this bother you?
Scammers are employees who make losses and still claim bonuses for themselves. I think this is inappropriate. People who do this really should be called robbers. But not everyone. The problem with hot periods like this is that no one is talking about other decent workers.

On the advice of the Federal Council, the SNB and Finma, UBS swallowed Credit Suisse, which was founded in 1856. Are you sad or happy?
The correct word would probably be: disappointed. I don’t have a Swiss passport, but the bankruptcy of the well-established bank touches my patriotic feelings.

Let’s start positive. What is the strength of this solution put forward by the government and officials last week?
Its strength is this: It is a solution. He put an end to his bank run in CS that Switzerland probably couldn’t let happen. However, it is also a dubious solution.

how?
The Swiss financial center thus effectively died out as an international financial centre. We may not realize it for ten years, but that fate is already sealed today. A financial center with only one international bank is not alone – it may still pretend to be, but it is self-deception. This landing will also change the way Switzerland looks at itself. Imaginary suffering, endless debates. Oh good. Switzerland will live.

You have started an offer yourself. He aimed to nationalize CS. But seriously now: why would the Ministry of Finance or the SNB manage a troubled bank?
They wouldn’t – and that wasn’t my suggestion either. My opinion was different. Increasing its balance sheet to 1000 billion in recent years, SNB has been buying shares from all over the world for years. Apple etc. instead of continuing to invest, he could have bought all the shares in CS and brought in a viable CEO who would form a competent, decision-making board around him. Then CS would get cleaned up and do some serious business, in a few years CS would be worth 50 billion again. It would be the best deal SNB has ever made.

Such a strategy would take time. Finally it was no more.
TRUE. Action was taken last week because all that was left was to react – just last fall, SNB could confidently convey that it would not let anything go to waste. Because it was already clear to all parties involved at the time that the CS was hanging by a thin thread. But it didn’t.

From where?
I can only guess. Finma obviously knew very little about the exact course of action. They didn’t know how dangerous a position CS was in.

Well?
This CS has very few competent staff with banking experience.

The supervisory authority may not order a private company to reappoint management or the board of directors.
It cannot give orders, but can clearly state to the board that they are performing their duties and providing responsible management.

So you’re counting CS’ board of directors as the main culprit of the misery?
I am not condescending or blaming. But it is clear: the leadership has failed. People care more and more about all kinds of things that are the core business of a bank, which is to build trust, manage risk and make money. And I guess they didn’t do it because they didn’t have the knowledge. But then I ask myself – why do you elect people to the board of directors who, at best, have theoretical knowledge of the business?

Was it different before?
Sure – and today should be different. There is a need for competent board members who know the job and can select and recruit the right management. Have sufficient knowledge to question management and risks.

OK. What do you think was the last big mistake that decided the fate of CS?
It wasn’t just any tweet, as is now often said. Rather, it was a business decision that was fundamentally wrong: I think the biggest strategic mistake was the capital increase that CS made in the late fall of 2022. This heralded the final stage of the descent.

Why this?
The timing couldn’t have been worse – the increase was announced when the share was still worth 4 francs and the subscription price of the new shares was 2.57 francs. Shares also traded at a quarter of their book value. It doesn’t take a genius to realize that issuing stock at such a low book value indicates bigger problems. The falling spiral could no longer be stopped and the final sale of the bank began.

After the 2008 financial crisis, Switzerland passed a law “too big to fail” that was clearly not worth the paper on which it was written. Be honest: Wasn’t this obvious to Finma and the bankers from the start?
You can’t say it like that. The essential features of the legislation were absolutely correct and well thought out. However, what I do know is that there were many professors and smart people on the panel of experts at that time, but very few bankers. This means that there was a lot of theory, but little practical interest. You can have as much equity as you want. When liquidity runs low and a bank run occurs, you have a real problem. It seems like this hasn’t been thought through enough.

The debate now draws a clear distinction between a liquidity crisis, a bankruptcy crisis, and a crisis of confidence. Do you think it’s true?
Definitely. Trust is everything in banking. If there is no trust, you will first have a liquidity problem and at some point you will also have a solvency problem. You are alone, no one wants to do business with you anymore. A lot has changed in the last ten years. The world has become a village, connected by the media like never before – a cough somewhere can trigger a storm in this country just because it’s reported.

The “too big to fail” legislation also allowed for the Swiss part of the business to be separated from the universal bank. In an emergency that would never work, the Americans and British would never let themselves be taken care of. Or is it?
TRUE. It was a wishful thinking—but not for bankers who were largely absent from the committee, but for officials.

Now, would it be a smart move to separate the Swiss business of Credit Suisse from the giant and create some kind of new Swiss credit institution? The markets have calmed down a bit, the bank rush is a thing of the past for now.
Again: nice mind game. But it doesn’t work for two reasons. First, UBS has a contract and does not back down from this contract easily. UBS got a good deal with the CS acquisition, congratulations. Second, if things were suddenly different again, the Swiss representatives would appear as completely unreliable contemporaries. This won’t happen.

How is it going from here?
Things are going well. Switzerland’s international financial center is history. But Switzerland is not history. He should reflect his entrepreneurial qualities and not cry for the past. More courage!

Interviewer René Scheu is a Blick columnist, philosopher, and director of the Institute for the Institute. Swiss Economic Policy (IWP) in Lucerne.

Source :Blick

Tim

I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.