Venerable Swiss Banks Scramble to Keep Cachet
RECENTLY the research department of Switzerland's second-largest bank discussed telephone etiquette for foreign clients. Should one address English speakers, a staffer asked, by their first name?
The issue was not resolved, but it was indicative of what is happening in this country's largest financial institutions. Switzerland's bankers are expanding their horizons.
It is high time they did.
"They [Swiss bankers] don't have the clout or the cachet that they did 10 or 20 years ago," says Rodney Smith, managing director of Seligman Henderson Company, an international money-management firm based in New York and London. "I think they're the victim of the general trend in the polarization of financial services.... They've been very slow to react to the changing climate."
Now, Switzerland's largest banks are moving into new businesses and acquiring companies abroad to move back into the big leagues.
Switzerland has long had a unique role in international banking. Its bankers excelled in discretely handling the money of some of the world's richest individuals.
"In my mind, Switzerland has not been a financial center comparable to London or New York or Tokyo, because Switzerland has not offered all the services," says Markus Lusser, chairman of the governing board of the nation's central bank, the Swiss National Bank here in Zurich.
But there are only so many wealthy individuals to go around. So Swiss bankers are aiming at the next obvious target: institutional banking. Their logic goes something like this: If Swiss bankers can manage the portfolio of a millionaire, they should be able to manage the portfolio of an institution, like a multinational corporation. That is exactly what Switzerland's top three banks - Union Bank of Switzerland (UBS), Credit Suisse, and Swiss Bank Corporation - are doing.
"The international strategy is to become one of the main players in the '90s," says Walter Metzler, a UBS vice president. The main component of that strategy is to have a presence in the New York, London, and Tokyo financial centers. UBS, for example, has set up asset-management units in London, Tokyo, Zurich, and, most recently, in New York. "With our asset management in New York, we made a great leap forward," Mr. Metzler says.
Likewise, Credit Suisse's parent company, CS Holding, now owns CS First Boston Corporation, a global investment bank and securities firm.
But the more completely Swiss bankers shift into these new fields, the fewer traditional advantages they will retain, Mr. Lusser says. The factors that make Switzerland an attractive place for individuals are not necessarily the ones that will pull in institutional investors.
Secrecy is one element. The Swiss have always managed to shield private clients from prying eyes of governments. But discretion does not matter for most institutions, since their public shareholders require open disclosure.
Another Swiss advantage - a stable currency - is losing its importance. A stable Swiss franc was a strong attraction for individuals who kept their money in bank accounts. But institutions - and, increasingly, individuals too - are putting their money into stocks all over the world. "Other countries' financial centers have become more attractive than before," acknowledges Fritz Stahel, senior economist with Credit Suisse. So "what was unique for Switzerland - political stability, economic stability - now
has to be shared."
Ironically, even if Swiss bankers manage to edge their way onto the world scene, it may not do much to bolster Switzerland's standing. As they move outward, they are also decentralizing. Credit Suisse, for example, began a program this year to expand its private banking services to other countries. That is a natural progression for a bank that opened its first international branch in New York in 1945. What's different is that a client in, say, Britain, will no longer be handled by Zurich but by the bank' s London subsidiary, Financiere Credit Suisse-First Boston. The London office also handles northern Europe, including Scandinavia.
That trend may account for the recent weakness in banking jobs within Switzerland. For years, Switzerland's service sector grew as banking and insurance firms added jobs. But since 1991, job growth in the banking sector has turned negative, says Manfred Gutmann, a UBS economist. In 1992 alone, the sector lost 2,850 jobs. UBS itself has contributed to the trend. Last year the bank cut 581 people from its Swiss operations even as it added 184 abroad. One-fifth of the bank's employees now work abroad.
Will Switzerland really lose its clout?
"For Switzerland, maybe it's yes," says Metzler of UBS. But "as a place for private banking, I would think that Switzerland can hold its position and maybe even expand a little bit."
"Switzerland, as a financial center, has a niche," Lusser adds.