It is one of the most spectacular personnel changes in recent Swiss banking history. Credit Suisse's general counsel departs with a renowned successor waiting in the wings.
Credit Suisse's executive board is about to undergo significant change. UBS's recently departed long-tenured group general counsel, Markus Diethelm, is to replace Romeo Cerutti, who holds the same function at Credit Suisse, according to research by finews.asia.
That means that Switzerland's troubled second-largest bank faces a critical week. It is scheduled to publish its first-quarter 2022 results on Wednesday while its AGM is slated for Friday. This all comes after last week's warning that it expects to report a loss.
Extensive Contact with Credit Suisse
When asked by finews.asia, a Credit Suisse spokesperson said: «Over the past few months, Credit Suisse has been implementing its new strategy and organizational structure as announced last November. Part of the work. which was led by the CEO and undertaken together with the board, involved succession planning and new appointments for leadership positions. That comprised certain legal units, certain regions, and potential leadership positions. It is important to emphasize that the board has not yet made an actual decision. That will be communicated at the appropriate time.»
Diethelm has been in contact with Credit Suisse for a number of weeks, as finews.asia has learned. The planned step was not suggested, as certain sources in the financial sector had speculated, by Credit Suisse chairman Axel Lehmann. The input instead came from another source.
Board Decides on Tuesday
Diethelm has received a job contract and he is expected to sign it at the start of this week, most likely on Monday after a few adjustments are made. The board is expected to meet Tuesday and that is when the governance and nominations and compensation committees are expected to formally confirm the step, allowing the bank to communicate Diethelm's appointment as part of the first-quarter disclosure on Wednesday.
The change brings some controversy with it – in a number of ways. Credit Suisse faces a number of legal challenges that are consuming a tremendous amount of personnel resources and slowing the pace of its business. The most recent example is last week's profit warning, which forced the bank to raise its level of provisions for some risks that were up to a decade old while also mentioning it was experiencing a reduced level of overall business activity.
A Question of Trust
A recent case particularly sticks out in that context. At the end of March, a Bermuda court ruled against Credit Suisse in favor of former Georgian President Bidzina Ivanishvili and his family, awarding damages «substantially in excess of $500 million». That loss angered many large shareholders and it is in that context that the current legal coup is taking place. It is possibly seen as on way to restore some trust in Credit Suisse.
Diethelm, who left his old job last November, had previously been preoccupied with UBS's French tax dispute. In that case, he followed a strategy that is still paying dividends today. UBS initially faced a fine of 4.5 billion euros but that was cut down to 1.8 billion euros by a Paris appeals court last December, with about a billion of it confiscated by the state and 800 million paid out as damages. But UBS has appealed that decision in the meantime. What is certain is Diethelm himself achieved a great deal for UBS in that case.
Choppy Waters
He has been at UBS for over 13 years, seven of them as part of the executive board as General Counsel. He started his job in very choppy waters, coming to UBS when it was in dire straits. The Swiss National Bank had to use taxpayer funds to keep the bank afloat during the 2008 financial crisis and the government then had to step in and help in the U.S. tax evasion case just a few years later.
UBS staged a strong recovery after all that. It embarked on a new strategy from 2011 onwards, solidifying its place as the world's largest wealth manager. But the post-crisis era was also a time of cleaning up, as it was for most other major banks. It would be impossible to count the number of fines UBS has paid over the last ten years, from tax evasion, market manipulation, LIBOR, foreign exchange, and commodities – to sub-prime. The internal compliance function grew in parallel with all that, resulting in a clearer separation from legal.
UBS paid well more than $7 billion in fines over the last decade but according to Diethelm, UBS had been threatened with far higher penalties. And a person close to him says he is not one to shy away from a fight and it was due to his work in many cases where he astutely assessed the evidence, choosing whether to cooperate or not. Naturally, he also gathered teams of very high caliber around him. But most of the time, as in Paris, he was doing the talking.
Almost Extinct
The fact that he shows up in court in person separates him from most other corporate lawyers and it is likely he learned to love sparring in court when working at a number of prominent U.S. law firms. In this day and age, managers who take any kind of personal responsibility are becoming almost extinct in the corporate world. But Diethelm was always different. When at Swiss Re negotiating the liabilities from the 9/11 terrorist attack on the Twin Towers, he fought Silverstein's two-occurrence claim and won when the judges ruled it was a single attack and not two.
Diethelm's experience in the U.S. is likely to be of great benefit to Credit Suisse, especially since the bank still has some legacy legal issues to work through in the U.S. With his somewhat elitist but intellectually astute manner, he is said to be held in high esteem by representatives of the U.S. judiciary, according to financial circles.
Not only Friends
Of course, like everyone at that level, he has his detractors. What is undeniable is that he was a constant mentor to his teams and he actively supported women in their careers. Some say he gave off the appearance of being «non-bank» in a bank even though he knew UBS inside and out. The fact of the matter is that he did stand out in his dressing style from those wearing dark grey suits around him, and one that is close in style to Burkhard Varnholt, the CIO of Credit Suisse's Swiss business, who is known for his fashionable suits.
