Credit Suisse is adding two risk management experts to its board of directors. Axel Lehmann, a former chief operating officer of UBS and veteran of risk management roles at Zurich Insurance Group, will join Juan Colombas, a fellow risk expert from Lloyds and Santander, if their appointments are approved on October 1.
António Horta-Osório, Credit Suisse’s chairman, hailed their arrival as part of his push to overhaul the firm. “They will make an invaluable contribution as we shape the bank’s strategic realignment and enhance our culture of risk management and personal responsibility and accountability,” he said.
The appointments follow the hiring of David Wildermuth from Goldman Sachs as a new chief risk officer and the reappointment of some experienced risk professionals who had left the bank or been moved aside before the Archegos Capital debacle.
It accordingly seems fairly safe to assume that Credit Suisse won’t lose another $5.5 billion in exposure to a little-known fund manager any time soon.
It seems just as likely that investors and analysts will soon start complaining about missed revenue opportunities at Credit Suisse, however.
It seems fairly safe to assume that Credit Suisse won’t lose another $5.5 billion in exposure to a little-known fund manager any time soon
Finding the right balance for a bank board and the right relationship between a chief executive and a chairman is not easy.
Boardroom diversity is a goal for every bank now, as it is for all listed companies. Environmental, social and governance (ESG) factors are also becoming increasingly important for financial institutions, meaning that board members should be able to ensure that business heads are not just adopting slogans or setting their bank up for accusations of greenwashing.
Deutsche Bank’s asset management arm, DWS, is reportedly under investigation by US regulators for overstating the extent to which it meets sustainability criteria; and the irony of US government officials investigating greenwashing claims does not reduce the potential future ESG risks for boards.
And the lack of technology experience on bank boards remains glaring, especially in an era when virtually every firm endorses the same template of working towards a “digital future”.
Consulting firm Accenture recently analyzed the background of all board members of 107 of the world’s biggest banks – a sample of 1,896 directors – and found that just 10% had technology expertise.
Accenture made a series of recommendations, including steps to improve the technology quotient (TQ) of board directors.
TQ coaching certainly sounds like a very promising new business line for a consultancy firm. It may not be enough to make a meaningful improvement in the oversight and direction provided by a bank board, however. A TQ scoring system for board directors also smacks of the box-ticking that has increased the hours spent on many financial industry functions without always adding much value.
The obvious limits of a highly prescriptive approach to both appointing bank board members and using their time underscores the extent to which differences in outcomes will always be dependent on the performance of individuals.
Hands on
Horta-Osório’s appointment as chairman of Credit Suisse was widely interpreted as part of a trend towards more hands-on oversight of European bank chief executives when it was announced at the end of 2020. This view became more entrenched when the Archegos Capital losses led Horta-Osório to take direct control of reform for Credit Suisse once he was confirmed as the new chair at the end of April.
Horta-Osório has a good deal in common with Mark Tucker, the chairman of HSBC, which reinforces the idea of a trend developing for bank boards.
Both are known as assertive managers and there is now a widespread assumption that the chief executives of their two banks – Noel Quinn at HSBC and Thomas Gottstein at Credit Suisse – serve entirely at the convenience of the chairmen.
Gottstein and Quinn are effectively lifers at their institutions who became almost accidental chief executives during times of stress. It would not be a great surprise if their domineering chairmen decided to change strategic direction with new chief executives.
A dynamic that seems superficially similar might play out in a different way at another major European bank that has struggled in recent years, however.
Paul Achleitner is finally about to give up his role has chairman of Deutsche Bank after a decade that has diminished his reputation as a business leader in Germany.
After taking over Deutsche’s board in 2012, Achleitner installed two chief executive regimes that ended in failure – first the joint management of Anshu Jain and Jurgen Fitschen, then the appointment of John Cryan as a type of caretaker manager.
Achleitner finally made a successful selection when he named Christian Sewing – a Deutsche Bank lifer with a background in risk management – as chief executive in 2018.
Finding the right balance for a bank board and the right relationship between a chief executive and a chairman is not easy
Sewing has been given the credit for Deutsche Bank’s recovery since then, while Achleitner is effectively being hounded from office, with the European Central Bank reportedly pressing for a quick announcement of a new chairman ahead of his scheduled departure next May.
US investment firm Cerberus, a Deutsche Bank shareholder, was rumoured at the end of last year to be pushing for Achleitner to be replaced as chairman by Colm Kelleher, the former Morgan Stanley president, who might have been taken by the idea of joining the ranks of hands-on European bank chairs.
But more recently a consensus has emerged that Deutsche Bank will almost certainly appoint a German as its next supervisory board head (Achleitner is Austrian, despite his position at the centre of business life in Germany).
Names discussed for the role include Deutsche Börse head Theodor Weimer, Bayer and PricewaterhouseCoopers veteran Norbert Winkeljohann, and former Volkswagen finance chief Frank Witter. Of these three, only Weimer has experience as a banker and that was almost entirely within Germany.
There is accordingly a good chance that Sewing will be given a relatively free rein under his next board supervisor – barring any disasters, of course.
Advice
If Horta-Osório finds that his highly anticipated strategic plan for Credit Suisse comes under criticism for failing to chart a path to revenue growth, he will be able to turn to a couple of members of his board for advice.
Michael Klein, the Citigroup veteran who has been one of the most prolific dealmakers of the last decade as an independent adviser, has been on the board of Credit Suisse since 2018.
Klein’s personal cash engine of special purpose acquisition company creation seems to have stalled temporarily, so he might have some time to give Horta-Osório tips. And Horta-Osório was joined by Blythe Masters as a new appointee to the Credit Suisse board on April 30.
Masters ran groups that were industry revenue leaders during her time at JPMorgan, including structured credit and commodities. She was chief executive of blockchain firm Digital Asset for three years from 2015, which gives her three more years of IT experience than most bank board members.
She also helped Credit Suisse to compile its report into the Archegos Capital debacle, so she has just completed a crash course in the bank’s internal politics.
Who knows? Masters might even be persuaded to step in as chief executive of Credit Suisse if it turns out that Gottstein is surplus to requirements.
