Today's private banker has to be as clever as the investment banker yesterday, says Oswald J. Gruebel in an exclusive interview to mark the launch of finews.asia.
Oswald J. Gruebel is the only banker to have been in charge of both Swiss banking behemoths. The citizen of Germany was head of Credit Suisse from 2003 to 2007. As chief executive of UBS, he initiated the turnaround in 2009 before resigning in 2011, taking responsibility for a mega-fraud committed by a London trader.
Since then, Gruebel has been what one might call an independent elder statesman enjoying his regained private life. He remains a keen observer of the developments in Asia, where he spent years as chairman of Credit Suisse First Boston (Asia).
Mr. Gruebel, what's your impression of the financial industry of Singapore?
I personally got to know Lee Kuan Yew and his successors during my time at Credit Suisse. As a Swiss institute, we were able to provide advice on how to develop Singapore into a private-banking center. We had meetings lasting for hours. Judging from the development since, it worked. Singapore is a success story.
What are the foundations of this success?
A small country such as Singapore has to work particularly hard to be better than its neighbors. If you let up, you will be swallowed. You also have to be able to defend yourself, which explains the importance of the powerful airforce of Singapore.
«Let's put it that way: Lee Kuan Yew always knew what makes people tick»
That's the price of remaining independent. Singapore understood this very well – from the very beginning. For the rulers there has only ever been one way, and that was democratic capitalism.
It's known as state capitalism.
Let's put it that way: This type of capitalism has been strongly influenced by Singapore's founding father, Lee Kuan Yew, who always knew what makes people tick.
Which is?
Human beings need an incentive to work. That's the basis of capitalism. Socialists believe you can motivate people with visions alone. It doesn't work, as we know. We don't live in paradise anymore.
When were you active in Singapore?
In the 80s, I was very regularly there and sometimes spent weeks in Singapore. CS had an open line across the globe enabling it to trade for 24 hours – one base was in Singapore.
«It isn't enough to just sit and wait for customers»
It was a most interesting time of construction. Singapore was pretty rural at the time and personnel scarce. We had to train people. Today, everything is different.
How do you mean?
A private banker today has to be as clever as an investment banker yesterday. He needs an enormously broad knowledge and the ability to react very swiftly. It isn't enough to just sit and wait for customers.
«Capitalism in principle is always a success story as long as the state doesn't meddle in it»
Technology is changing private banking enormously and also accelerates it. Add to that the many new regulations. Furthermore, customers today have access to everything and often are better informed than their advisers at the bank.
Looking at the development of China over the past twenty or thirty years, it is also a success story. Where do you see the main differences to Singapore?
Capitalism in principle is always a success story as long as the state doesn't meddle in it. Otherwise, everything gets out of control. In China, there's something akin to a capitalist socialism. With the success of the system, questions and challenges arise for the government.
How's that?
The need for freedom of opinion rises in line with prosperity. The transition to that is the big challenge facing China earlier or later.
How well do you know China?
At least I've been there at a very early stage, in the 80s. The country at the time was still terribly poor. I lost several kilos during each trip. Since then, the country developed at breakneck speed. I've met every bank manager of importance in China.
«The Chinese have a healthy attitude towards their money, they always award it first priority»
Credit Suisse in 2006 had a substantial stake in the going public of Industrial and Commercial Bank of China (ICBC). The company had almost 20,000 branches at the time. I asked the managers how you could become head of a branch. The answer was: The local branch of the party decides. Just imagine this!
That's clientelism.
That's why all Chinese banks had to be restructured at the time. But in the 70s, the big banks even in Switzerland together agreed about how much of their profit they would report. All banks earned markedly more than they reported. A lot of their profits was put into the undisclosed reserves. It was absolutely legal and encouraged, but not at all transparent as so much still is in China today.
How do think Switzerland is being perceived in China?
The Chinese have a healthy attitude towards their money. They always award it first priority. That's why they love Switzerland and its banks. Did you know that UBS years ago took hold of the Chinese signs for «First Swiss Bank»? When I was still at Credit Suisse, I was terribly envious.
«Their sense for historic achievements makes Chinese and Asians stand out»
Anyway, a lot of Chinese admire Switzerland to this day. Which partly explains the big success of Swiss banks in Asia. UBS is the biggest wealth manager in the region and Credit Suisse is the No. 3.
In our Western opinion, Asian customers are gamblers, people who are very trading-happy. Correct?
Many Asians who made money did so by doing it their own way, by listening to their intuition. Entrepreneurs on average are more willing to embrace new things. Don't forget, the Chinese culture is reaching back thousands of years and produced a great many fantastic things, even if the revolution destroyed a lot of them. Their sense for historic achievements makes Chinese and Asians stand out.
Is Hong Kong today less secure than Singapore?
A lot of people in Hong Kong still think they are independent from China, which manifestly isn't true. Fact is that Hong Kong belongs to China but still profits from the experiences made during colonial times.
«Banking is and remains the best way to get to know the world and its people»
Beijing is awarding Hong Kong a great deal of freedom, but takes businesspeople into custody who collide with the regime. That's why many Chinese like to take their money to Swiss banks.
Given the chance, would you become a banker again?
Yes I think so. Today's challenges are totally different though. In the 60s, when I started, the world still was very big. There were places nobody knew and about which people only talked in private. Today, with the technology that we have, the world has become significantly smaller.
I detect a certain wistfulness – rather than a wish to become a banker again.
Banking is and remains the best way to get to know the world and its people. But technology has fundamentally changed many industries. Some sectors will disappear, others will profit. In banking, you're very close to these developments.
What was the most difficult aspect about the turnaround at UBS?
There wasn't one single aspect. Rather I stood there staring into the abyss. The market in March 2009 was dominated by a sense of panic. In such a situation you can do one thing only: Tell employees how things are and tell them clearly what this means for them.
«People want clarity»
It doesn't usually sound great. But it's the best way forward, because they all know how things stand.
And that's what you did?
Yes. People want clarity. It's the only way to get employees behind you and that's the key condition for a turnaround – you can't do it alone. You can always exchange the top management, but not the employees, because you need them.
UBS is looking fine again.
With respect, UBS is world class, looking at the credit-default-spreads. UBS has the lowest grades, better than those of the biggest U.S. banks.
Do you have role models?
There is a number of people in history of mankind who were great. One I like is Winston Churchill. His country called upon him when it didn't know what to do anymore and chucked him out when things were going smoothly again.
«Asians perceive Genghis Khan differently»
That's the irony of history. Capable people are entrusted with a lot of power in times of crises. As soon as things are better again, they become surplus to requirements. It happened to me too.
Do you have other role models?
Genghis Khan, considered by Europeans to be a murdering and thieving devil incarnate. Asians perceive him differently. There, he's seen as a statesman who created structures, developed war technique and was guided by a sense of fairness.
Is your fascination for the financial services industry still alive after so many years?
Yes, absolutely. Today, you can inform yourself 24 hours a day. I love that. Those who're not interested in this can't be in banking.
«I strongly believe there are things which are right or wrong»
Would you say that wealth is a measure of success?
I strongly believe there are things which are right or wrong. Today however, right and wrong is frequently being mixed up. Because it is politically not correct to say what is right or wrong. People try to please everybody.
Does money make you independent?
It makes you more independent. Perhaps you need to be born penniless. Because you then have a very strong incentive to do something. It was that way with me. You can choose to rob and defraud of course. But those are the people on the dark side of power.
