Arturo Bris is known for being one of the theoretical fathers of the world competitiveness ranking of the prestigious IMD business school based in Lausanne. In this interview he defends, despite the financial turmoil, the country’s economic model. “Switzerland is much more than banks,” he says.
Do you agree with the idea that the end of bank secrecy may have made Swiss banks less competitive in the global village and hastened Credit Suisse’s downfall?
Not at all. Switzerland’s dominance in the wealth management industry has been due to political stability, lack of uncertainty, and the country’s legal and social climate. In fact, the disappearance of bank secrecy in 2009 has not meant a significant loss of market share for Switzerland.
After the closure of Swissair and now the sale of Credit Suisse, what is the reputation of the Swiss economic model?
I think that the closure of Swissair did not affect the Swiss reputation much. In fact, it was a very good acquisition for Lufthansa. Instead, the Credit Suisse case is going to hurt the reputation of the country, first because a bank as big as Credit Suisse has been allowed to make very serious strategic and governance mistakes and, second, because probably in the way the that the crisis was resolved has not been the best.
But Switzerland continues to lead in excellence in talent and competitiveness, according to their studies. How then is this sudden weakness of the financial sector explained?
Switzerland’s troubles began when its investment banking division became enormous in size and in fact this was led by an American CEO, Bradley Dougal. In other words, his talent and management in Switzerland is not necessarily something that has played against him. The Credit Suisse issue is probably an isolated issue as far as strategic choices are concerned, but it’s certainly not a systemic issue in the country.
After what happened, due to the structure of its economy, does Switzerland now need to diversify more than in the past to attract investment?
The Swiss economy, contrary to popular belief, is highly diversified. It is a mistake to think that Switzerland is a country of banks. The financial system here represents approximately 15% of the added value of the country. Switzerland is primarily a country of production and services. Let’s not forget that we have the world’s largest consumer products company – Nestlé – the world’s largest pharmaceutical companies, such as Roche and Novartis. Also some from the field of engineering such as ABB and many other impressive ones at an industrial level. The banking sector is not that important.
How does Swiss society experience the current financial turbulence on a psychological and emotional level?
Switzerland is a country used to being talked about, either because of its natural beauty or because of its economic and political success. Therefore, this supposes a great crisis of mentality or confidence in the country itself. I believe that little by little it will be solved, but to a certain extent this damage will also be very difficult to repair because it has never happened that Switzerland is spoken of as negatively as it is now.
Is the UBS / Credit Suisse merger sustainable in terms of competition? How is private banking after the birth of this giant?
In private banking there is no competition problem. In other words, Switzerland competes within the country with banks like Julius Baer or Pictet. It is true that they are not that big, but they are competitive and outside of Switzerland they compete with JP Morgan and many other American and Asian banks. The problem is not so much in private banking but in retail banking, in Swiss retail banking, because we are going to have a very dual banking market with a giant like UBS Credit Suisse, and then a list of small cantonal banks that operate locally and cannot compete in Switzerland. There were three universal banks before this crisis, Credit Suisse, UBS and the Zurich cantonal bank. Now there are only two left, but the Zurich cantonal bank only operates in Zurich. In terms of competition we are going to be much worse than before.
