Weak growth poses biggest challenge

Peter Wuffli swissinfo.ch

The head of the UBS financial services group, Peter Wuffli, says that one of the biggest challenges facing Switzerland is how to tackle its poor economic growth.

In an interview with swissinfo’s Robert Brookes, Wuffli also outlined his strategy at UBS and explained his position on banking secrecy and corporate governance.

Wuffli, 45, told swissinfo that growth had to be achieved in terms of productivity, innovation and increasing competitiveness.

He also believes Switzerland will continue to enjoy a “very substantial edge” as a financial centre, that Swiss membership of the European Union is “not a topic” for the foreseeable future and that it may be “quite some time” before the Swiss economy picks up.

swissinfo: As one of the economic leaders of Switzerland, what is your vision for this country?

I am confident that our country stays as successful as it has been over many years and decades and that it will continue to capitalise on its strength, which is a series of leading positions in very attractive global segments. There are also some distinct factors of how we operate as a society, with a very high degree of integration between political and economic forces. We have good ways of balancing the interests of various elements of society and obviously we should protect the qualities – and here I’m speaking a bit pro domo – of Switzerland as a financial centre. Obviously banking secrecy is one of the key terms here.

Does your vision of Switzerland include the country in the European Union?

Not necessarily. I think Switzerland is and has to remain competitive in a global context. The European Union is obviously one of our very important partners but the United States is also very important, as is Asia-Pacific. Geographically, we are in the middle of Europe but we operate with very strong global ties. I think membership of the European Union is not a topic for the foreseeable future.

Is the quality of life in Switzerland better now than say it has been in the past and here I’m thinking of the workforce, I’m thinking of managers, schools and education?

I’ve spent two years abroad, in the United States, and if you spend time abroad you tend to appreciate home more. I must say when I came home a year or so ago I felt that Switzerland had advanced a lot. I think it’s become more modern – it’s restructured in various ways and a lot of the issues have been addressed. I think there is a lot of thinking going on in terms of our education system, for example, and there is a lot of modernisation going on in how we deal with political issues. So I feel pretty good. I think we have made a lot of progress and we have addressed a lot of issues, also economically, that some of the other European countries may not have addressed in the same way. For example, our small and medium-sized enterprises have learned from the very significant real estate crisis in the early 1990s, and many of them have become quite competitive on a world scale.

But of course if we look at some of those economic issues – I’m thinking about liberalisation and cartels in Switzerland – some progress really does need to be made, doesn’t it?

Absolutely. We do have sectors in the economy which are too protected, where price levels are too high, where productivity is not enough and, let’s face it… overall, there is a lack of growth. The biggest challenge for our country looking forward will be to achieve growth in terms of productivity, in terms of employing innovation and knowledge, in terms of upgrading our competitiveness in areas where it is not there, and in terms of liberalising. That is a major challenge and I think that’s something where we, as many other countries, still have a lot of work to do.

Let’s come closer to home. What is your strategy at UBS? In what direction are you going?

UBS has a very consistent strategy for many, many years. It’s very simple. We want to be recognised as the best financial services company worldwide and we are active in three main areas – one is wealth management and asset management globally where we are the world leader, one is investment banking where we are among a select group – a handful of global bulge-bracket firms – and the third is the leading bank in Switzerland. These are our three pillars.

Many banks are shedding jobs by the thousand, as you are well aware. Is the downturn that’s hitting the industry going to force you to cut jobs too?

We have been cutting jobs but to a much lesser extent and we are very careful in balancing the need to be defensive in the current, very turbulent environment, while at the same time ensuring that we maintain opportunities for growth when the upturn occurs. While currently there is a lot of bad news out there, we are convinced that at some stage in the foreseeable future, we will see better times.

Some would argue that the advantages of Switzerland as a financial centre have been eroded somewhat because there’s stability, reliability and confidence elsewhere in the world. Why should investors bring their money to Switzerland?

Well, just to be precise, Switzerland’s quality has not eroded but it is true that other countries have improved. In the post-war environment, many European countries didn’t have free capital flows and had a very limited array of products. I’m very confident that we continue to enjoy a very substantial edge based on our tradition, our very strong market position in international private banking, as well as the fact we have traditionally been very international and globally oriented as a small country and global investing is one of the key challenges for any particularly wealth management firm.

Can you get your crystal ball out now and give your prediction for the Swiss economy over the near term.

Unfortunately, the news flow has been consistently negative over the past several months. There is relatively little positive news out there and therefore most economists are revising downwards their expectations for growth. We still do not see any major recession but we are also not very optimistic about a very fast recovery, so we may see stagnation for quite some time.

What gives you most enjoyment at the bank?

It is the feeling that our work over the past decade in developing Swiss Bank Corporation and Union Bank of Switzerland into one of the most powerful and highest-quality financial institutions on the planet is finally being rewarded. We have had our ups and downs in the past. We have sometimes been criticised for being too conservative when we had the bubble and obviously now the defensive qualities are what count.

What would you say about a possible merger between UBS and Credit Suisse?

That would not be a very good idea. We have a strong interest as a financial centre to maintain two large and healthy financial institutions.

Would you buy shares in Credit Suisse?

I think I’m pretty concentrated in the financial sector with my UBS shares already.

In brief

Peter Wuffli was appointed president of the group executive board of UBS in December, 2001.

He succeeded Luqman Arnold, who had held the job for only seven months.

Before his appointment, Wuffli was chairman and CEO of UBS Asset Management. Previously he had been UBS group chief financial officer.

From 1994 to 1998, he was chief financial officer of the Swiss Bank Corporation and a member of SBC’s group executive committee.

In 1984, he joined McKinsey as management consultant and in 1990 became a partner of McKinsey Switzerland’s senior management.