Raoul Weil: «I Know What Can Go Wrong in Crisis Management»

Raoul Weil experienced a state bailout at UBS firsthand. He was also successful at defending himself against the US. The CEO of asset manager Reuss Private Group talks to finews.asia about the Credit Suisse takeover and the Russia sanctions.

Raoul Weil, what do you talk about with your clients at the moment?

Our clients are mostly entrepreneurs. They are either at the helm of a company or have just sold one. The aim is to find a management solution for the liquid part of the assets that the customer can get behind not only financially, but also psychologically.

Is there a conflict of objectives?

Very often we see a strong discrepancy between risk capacity and risk appetite. Anyone who has been invested for a long time knows that the stock markets go in both directions. In the long term, however, the trend has so far been upward, fortunately.

To return to the initial question: Don't clients want to talk to you about UBS and Credit Suisse? After all, you were once in charge of UBS's international private banking?

Of course, I also considered whether the sale of Credit Suisse to UBS was the best option, especially from the taxpayer's point of view. But in view of the fact that there was a bank run on Credit Suisse, the state probably had to act in this way.

At the time of the state bailout of UBS in 2008, you sat on UBS’s management team. The reaction should have been: never again!

It is regrettable that they waited so long to intervene. But there was probably no other legal or regulatory option. Earlier intervention would have required either a major global banking crisis or a breach of minimum capitalization.

«So far, Iqbal Khan has done a good job»

Neither was the case when Credit Suisse was rescued – even though there was already a great deal of skepticism in the market about the bank's financial situation, as evidenced by its share price. If there is a PUK and one day it has all the facts on the table, it will probably come to the same conclusion: There was no alternative.

UBS has to now turn the debacle into a success within four years. What advice would you give to your successor, Iqbal Khan, the head of asset management at the bank?

So far, he has done a good job. UBS has an excellent global franchise and, in terms of its presence in various markets, has a massive lead over its European and American competitors. The chances are high that the combined bank will also be successful in wealth management. On the other hand, I know from the UBS rescue and from my time as head of Asia in the late 1990s during the merger of Union Bank of Switzerland and Swiss Bank Corporation what can go wrong in crisis management.

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Especially when they take over an investment bank, they need to have a handle on illiquid assets whose risk is calculated with models. These so-called Level 3 positions are already almost impossible to trade in normal times.

«The investment banks of the big Swiss banks got the money too cheaply»

The same applies to new types of financial products where it is not yet known how they will behave in times of crisis. At UBS, securitized mortgages were relatively liquid at the time. Then, during the financial crisis, they froze.

So those politicians who demand that banks hold considerably more equity capital are right?

No, it would be a disaster for the mortgage market and for SME loans in Switzerland! They would become scarcer and more expensive. And the real problem would not be solved: Traditionally, the investment banks of the Swiss banks received money too cheaply because they were attached to a group with a good rating. But when money is cheap, you take more risks. The regulatory approach would therefore have to apply precisely to these risky businesses.

Is Reuss Private the right address for Credit Suisse bankers looking for a new job?

We are always open to new client advisors, there is no discussion there. On the client front, we continue to hire. The first changes are now taking place at private banks.

«For Russian assets, they can hardly find any custodian banks in this country»

anyone who wants to try their hand as an independent asset manager should not only have client contacts, but also a sense of entrepreneurship. For us, this means that we have to look carefully at who we hire - and which clients cross over with us.

In this respect, the risks seem to be increasing. The US, for example, has targeted Swiss fiduciaries and asset managers as suspected accomplices of sanctioned Russians. You experienced firsthand how risky this can be for the industry during the tax dispute with America: You were accused of aiding and abetting tax fraud in the US, and you were imprisoned and had to defend yourself in court in Florida.

We certainly don't travel to Russia anymore. However, if a client is a dual citizen domiciled outside Russia and has passed all the checks cleanly, we see no problem in providing further support. In our case, there is even a triple due diligence: We have to meet Finma's standards both as a securities firm and as an asset manager. The custodian banks then carry out their own checks.

But are smaller providers than Reuss Private more at risk?

The fact is they can hardly find any custodian banks for Russian assets in this country. The business with oligarchs is definitely over. Essentially, I think it's important for Switzerland to abide by Swiss law and withstand pressure from abroad.

In the end, won't the only thing left to do in regard to the US be to cave in? As was the case with bank secrecy?

So far, the Federal Council has remained relatively firm. It cannot be ruled out that the pressure will increase. But Mr. Berset rightly pointed out that twice as much Russian assets have already been frozen in Switzerland as in Germany and France combined. And I didn't buckle back then either and in the end, I was proved right!

Raoul Weil has been CEO of the Reuss Private Group, which operates in Switzerland, Germany and Liechtenstein, since the beginning of 2022 where he has been Managing Partner since 2010. His career includes positions as chairman and CEO of Global Wealth Management & Business Banking and member of the Group Executive Board of UBS. In 2013, he was arrested in Italy for his former role at the bank and extradited to the US, where he was tried in the US tax dispute. He was acquitted there in 2014.