PLAYING WITH STEROIDS

BANKER’S DELIGHT

This Swiss financial boss wears moccasins and turtlenecks—and laughs a lot

Peter C. Newman March 22 2004
PLAYING WITH STEROIDS

BANKER’S DELIGHT

This Swiss financial boss wears moccasins and turtlenecks—and laughs a lot

Peter C. Newman March 22 2004

BANKER’S DELIGHT

This Swiss financial boss wears moccasins and turtlenecks—and laughs a lot

Peter C. Newman

ZURICH MAY well be the most desirable city on the planet, as the annual Mercer Human Resources Consulting LLC survey suggested again this month. The study ranked Switzerland’s largest city as No. 1 based on stellar work ethic, superb education system and per capita wealth. But it took no account of the less dazzling fact that Switzerland is an intensely regimented society: everything that isn’t illegal is forbidden—and everything else is compulsory. It’s a gravely conservative place and its most reactionary citizens are the bankers, who ride herd over more than a third of the world’s offshore assets: the equivalent of about $1.7 trillion.

It was a surprise, then, to meet Marcel Ospel, the 54-year-old chairman of UBS AG (formerly the Union Bank of Switzerland), the largest of the country’s 356 banks, who breaks the mould of his profession. Ospel recently welcomed me into his private office, on Zurich’s fabled Bahnhoffstrasse, and I could see immediately that within the discreet Swiss banking fraternity, he belongs to a category of one. The room was furnished with ultra-modern paintings and instead of the sober business suits that most Swiss bankers hide behind, he was wearing a brown corduroy jacket on top of a black turtleneck sweater. His feet were comfortably encased in black leather moccasins. He chain-smoked throughout our interview, sipping Diet Coke, and quoting Milan Kundera, the Czech existential novelist. His sentences were punctuated with laughter instead of the frowns most bankers display. “I like diversity of opinions and style,” Ospel told me. “If I dress and talk differently, it’s to show that we focus on substance over form.”

Unlike most bankers who either perpetuate a fraternal air of mystery or insist on treating their profession as a holy order, Ospel harbours few pretences and feels comfortable in his skin. Born in Basel, Ospel spent much of his formative youth in London and New York. His faultless English is peppered with such non-bankerish terms as “schmooze,” “boondoggles” and “turbochargers,” his description of rocketpowered bankers like himself. “It’s our intention in the future to offer services which are beyond today’s imagination of what bankers can do,” he says. “We have built a platform that will allow us to expand in many new directions.”

A former windsurfer, he is one of Europe’s highest paid bankers. His salary is $18 million, a 50-per-cent increase from the previous year. Profits at UBS almost doubled in that time, and dividends have been increased by 30 per cent. Like all his senior executives, Ospel receives half his pay as UBS shares, subject to a five-year holding period. “That’s to foster our long-term performance culture,” he says.

UBS ranks as the seventh largest among international banks, with 66,000 employees in 50 countries. That includes Canada, where it has branches in Vancouver, Toronto, Montreal and Halifax, with 450 employees. UBS leads all Canadian banks in its global trading of Canadian securities.

Under Ospel, UBS has come to rank first in wealth management and currently runs invested assets of $2.4 trillion. “After building up a holistic picture of a client’s wealth, we formulate a global investment and financing solution to the management of his assets and liabilities,” he explains. “Everything we do is designed to deliver an economic benefit. When you look at it that way, financial markets are not casinos whose only purpose is to make a quick buck.”

Despite his enlightened views on most aspects of his trade, he is an unrepentant advocate of Switzerland’s banking secrecy laws. He has wrapped the issue in the banner of human rights, saying individuals must be free to maximize earnings—and governments must realize that a rising tax burden makes a country less attractive and induces taxpayers to avoid a burden that they perceive as disproportionate. Swiss banks, says Ospel, should not have to determine whether foreign depositors are complying with the tax laws of their own countries. “We cannot and do not care whether income or assets are taxed or declared in the client’s home country,” he says. “The secrecy combined with our tough anti-laundering standards allows us to protect people’s privacy with determination and ethical conviction.”

The European Union has agreed to respect Swiss secrecy laws for another six years, and in the interval the banks have agreed to charge EU depositors a 35-per-cent withholding tax on interest and dividends, paid in a lump, anonymous sum to their home countries. Part of Switzerland’s unwillingness to join the EU is based on Swiss banks’ refusai to abandon their code of secrecy. But at the same time, Switzerland has adopted some of the toughest anti-laundering laws of any jurisdiction. “Anyone who wants to deposit more than 25,000 Swiss francs in any of our branches has to identify the source and provide us with the names of beneficial owners,” Ospel points out. “Banks that don’t take these rules seriously risk their licence; bankers that don’t take them seriously risk criminal prosecution.” In fact, UBS was reprimanded in 2002 for its lack of due diligence in accepting US$60 million in deposits from the children of former Nigerian dictator Sani Abacha.

A lot of overseas money still flows into Switzerland, not for tax reasons, but for safekeeping. For example, one UBS branch in Zurich has 13,000 safety deposit boxes. As well, according to one informed estimate, Saddam Hussein has billions of dollars hidden abroad, much of it in Switzerland.

Ospel’s career began as an intern in a small Basel investment bank. He trained himself in merchant banking in London and New York, then returned to Zurich to head the local branch of Merrill Lynch. By 1990, he was a senior executive in the Swiss Bank Corp. and in 1997 engineered its reverse takeover of UBS, emerging later as chairman of the merged enterprise. He made international headlines in 2000 with his bank’s US$12-billion purchase of PaineWebber Inc., the fourth-largest brokerage in the U.S. Other firms he has absorbed include S.G. Warburg pic, the British merchant bank and Dillon Read, a prestigious Manhattan investment bank.

*1 LIKE diversity of opinions and style. If I dress and talk differently, it’s to show that we focus on substance over form.’

The Swiss take their bankers very seriously, and when I told some Zurich friends about the heretical work habits of the UBS chairman, they didn’t believe me. But local gnomes have a saying that seems to the point: “If you see a Swiss banker jump out the window, jump after him. There’s bound to be money in it.” Given Marcel Ospel’s track record, it could be a long lineup. Iffl

Peter C. Newman’s column appears monthly. pnewman@macleans.ca