Sabine Keller-Busse | Zukunft der Banken – Banker der Zukunft (NZZ Standpunkte 2019)

It was the desire to really make a difference. I knew UBS from the outside and saw that the financial crisis had not passed it by. When the call came, I truly wanted to contribute. I had been in consulting for many years and witnessed the crisis at another bank. The motivation was to help this once very proud institution regain its reputation, especially in Switzerland, where it was needed most.

Basically, if I listen to our clients, it is a different bank. We get a lot of positive feedback. UBS today is not the same as before the crisis. Our business model now focuses on wealth management; we removed risk from the balance sheet. Risks are reduced by one third. More importantly, UBS has a different DNA and culture. We see that in client trust and growth.

That is a good question. Banking generally faces headwinds in the stock market from geopolitical issues and uncertainty. Our results improved by 18 to 25 percent last year, but our stock price suffers because we do not capture the volatility that US banks with strong investment banking do. Our low-risk wealth management model is not fully appreciated.

No, our business model is clearly wealth management. We removed high-risk activities. We stand by this model; long-term client business counts. We have also built capital and returned it to shareholders. We are convinced our model is the right one.

No, we removed the high-risk part of investment banking. We are still leading in equity trading, bond issuance, IPOs, and M&A. These serve wealth management and the Swiss economy. In Switzerland, we have a universal bank as a second pillar for private and corporate clients.

The Swiss market is important, with 36% of global revenues, but 64% comes from abroad. We are a Swiss bank with global reach. We have a third of our workforce in the US and are investing in Asia. We actively seek global growth.

Swissness is a huge competitive advantage – precision, security, stability. As a global wealth manager with a global platform, we offer services few can match. We focus on high-net-worth clients, not retail, making us a very attractive partner.

No, bank secrecy is history in international business. We have automatic information exchange now. We compete on Switzerland's stability, precision, quality products and service.

I think we are at a point where this story is behind us. I cannot judge the past. Today, Swiss banks stand for Swiss values – good products, clean processes. Bank secrecy is no longer an issue.

Regulation is important, but as a global player we do not want to wear a lead vest in the marathon. We need the same starting conditions. In Switzerland, we sometimes implement regulation earlier and faster, which can be difficult. For example, with too-big-to-fail and capitalization rules, we are at a disadvantage compared to foreign competitors.

We look at regulation and whether it makes sense. It must benefit clients and investors. If regulations make business difficult, it is problematic. On data protection, we should not have lower standards than abroad. But we need equal conditions, like the same net height in tennis.

The EU GDPR is more bureaucratic. Switzerland should have a version adapted to our conditions, but the framework must be considered equivalent. Otherwise it hurts reputation. For banks, data protection is crucial. We support client rights but also need to collect information for anti-money laundering. We must be smart and find solutions that allow the industry to fulfill its duties.

Access is very important. Europe is a partner. Regarding the framework agreement, we welcome putting it on a reasonable basis. It is not politically feasible now, but I hope we make fast progress because the status quo will become negative for us.

By focusing on what we must do: anti-money laundering compliance. We have rigorous know-your-client checks. It is a complex process that we do carefully.

We very much welcome foreign clients. We were cautious with US-dominated expats, but now with automatic information exchange, cross-border business is much easier.

In the US, we have a long tradition. We bought PaineWebber and have wealth management, investment bank, asset management. We are number four, so have catch-up potential. China is different; we were mainly in investment banking and now have a majority in a joint venture to expand wealth management. It is a growing market we cannot ignore.

There are already good Asian banks, but clients want diversification. We offer booking in multiple locations globally, which wealthy clients value. So we are well positioned.

No, but there are points to see. If you are a startup with no customers and one or two products, you can build IT from a smartphone...

Going to market as a bank with 150 years of history that started growing with the first mainframes and then through mergers, complexity naturally accumulates. But what we have done is repeatedly invest in modernization because that is very, very important. Investing in modernization is particularly positive today in a way it wasn't before. An example: our IT—we already have a third of our solutions on a so-called private cloud. What is that? It's a large, organized space where you have great computing power but without the spaghetti. We also partition our large IT into components—imagine it like the old cargo ships carrying everything mixed together, vs. a modern supertanker with standardized containers. Our idea was to take our historical data, customers, products, and build these containers around our applications—called containerization. Then we have interfaces, and we can place these containers on very powerful computers. That works well. So it is certainly more difficult than starting a startup from scratch, but that's where we are. We currently invest three and a half billion francs every year in our IT. With that, you can do a lot to turn spaghetti into a nice arrangement—so you don't have a spaghetti counter, but containers, to stay with the metaphor.

Our customers have to trust us, as before. But we are not the provider of mainframes; they are built by IT providers. The point is that they are in our data centers. When I talk about private cloud, think of it as earlier you had computers and servers on your desk; now the server is in the basement. And if it's a cloud solution, it's simply a larger, organized server where you can place containers. But it's still in our data centers. So customers must continue to trust us. What's new is the public cloud, a much larger data center run by a provider. That is used for areas without Swiss data protection, like international trades reported to clearinghouses. We use it to balance peaks. For a specific credit application, you need a lot of computing power. Instead of having a thousand servers in the basement that require constant updates and maintenance, you can rent capacity from the cloud and be completely flexible. But the question is data security: who has access? A method is encryption. The provider gets data salad, the bank keeps the key. They can process but not read. We ensure which data goes where. Normal data for international clearinghouses is public, but Swiss customer data stays in Switzerland. It does not leave the country. The encrypted salad can go to a cloud elsewhere, but the data itself doesn't leave. For highly protected customer data, it stays in our data centers. As for competition: we see it in simple areas like payments and account opening. We need to be fast: we open an account in 12 minutes with a video interview to ensure authenticity. Others do it in 6 minutes without video, but may get fake accounts. Competition is good and pushes us to develop. But we see that for major life decisions like children's education, retirement, mortgages, customers still want to see a face. That's the difference. Core banking for truly important questions will remain with banks, and that is trust.

We have to distinguish. Sending money via coins, we saw trust collapse with what happened. Blockchain is a very important technology for us to become more efficient. For example, in trade finance: importing bananas used to involve many parties and a central book; now we are part of a blockchain consortium (we.trade) with banks and logistics firms. It's like a private, modern highway, everything is recorded in decentralized ledgers, so everyone sees when bananas are loaded. That brings security and speed. I believe it will help our industry. The disadvantage was that blockchain worked best with a defined user group. We are also building a utility token with 14-15 other banks, backed by the national bank. So I believe it will not replace us; we need it to offer better solutions.

What we see with fees: for a simple account or payment, that is clear. Customers want added value. If they only have an online account with no relationship, they don't want to pay. But we see that personal conversation and advice for important life decisions—on the corporate side, financing, export financing—that is something they want to pay for as a service. That's included in the package when they bank with us.

We offer many options. If customers say they don't want certain fees, we offer, for example, if they do everything online and mobile and don't want paper mail, they get a different fee rate. Regarding comparison with abroad, we have to be careful. In Switzerland we have negative interest rates, which cost us money as a bank. We don't necessarily want to pass that on, but we still provide services. So the comparison of price levels with abroad is a bit difficult. That's the price for the stability of Switzerland.

We already had that in the corporate client area. We offered to let customers see as much of their asset situation as possible in what we call an electronic household account. The wave will come. At the moment, there is no enormous pressure from customers to do that. When there is, the industry will go that way. But we have to be careful that the rules are the same for all players in the financial sector.

I think, first of all, blockchain needs a virtual currency to send something back and forth, and there must be a certain security. That's what we're working on with the national bank-backed token. I still see blockchain functioning within a tight framework. What you're talking about already exists today, like peer-to-peer money transfers. Where I see the potential of blockchain is in global stock trading, where there are multiple parties. Today we need clearing parties. I believe processes will become faster, but I don't think banks will be eliminated; we will be part of blockchain usage.

I see a contrary trend. I believe we are heading towards a shortage of skilled workers that will also affect banking. The reason: in Switzerland, more people are leaving the workforce than entering. The baby boomers are retiring, and weaker cohorts are coming. So our future problem is to ensure we have enough skilled workers for productivity. Automation will help partly, but we need to do a lot to close the gap. I was shocked by a study on China's one-child policy: even China will have a skill shortage in about ten years. Those are demographic changes we can't change.

There are many views on how many jobs will be replaced. What will certainly happen is that routine, data-driven tasks will be replaced by machines. That allows us to redeploy employees who did those routines. The bigger challenge is that many jobs will fundamentally change. Training people is key. I don't think many jobs will disappear—different studies exist. As I said, demography suggests we need additional measures to maintain productivity.

One has to be careful: it's not simply that jobs disappeared. Some roles moved abroad. We are a global company, so it's difficult to do everything from Switzerland. Switzerland is a relatively expensive production location. If you are global and earn revenues in other currencies, you need to produce locally. Part of those numbers moved abroad but didn't disappear. New jobs are also created in Switzerland, especially in digitalization and innovation. We now have jobs in areas we didn't think of ten years ago.

That's what we are doing consciously. As I mentioned earlier, Switzerland is very important to us. It's a sign to set up in Switzerland. We want to place roles in the periphery: Schaffhausen, Biel, Ticino. The exciting thing is that there are great skills there. In Ticino, we recently cooperated with USI in Lugano on AI. That's a commitment: in a global context, everyone would expect us to put our AI center of excellence in China, but we deliberately placed it in Ticino for the Swiss bank.

Our perspective for Zurich is that we will be about balanced. We may see some relocations of individual positions, but fundamentally we will remain in similar size at the financial center. But our people will work differently. Activities will be different. We will deal much more with technology. But it remains our headquarters. That also means people need to be retrained, not just let go and hire others. Ideally, we avoid that. We have programs for lifelong learning, especially for those around 50. We built the UBS University two years ago to enable employees to develop further. Company culture needs long-term employees to carry it.

Thank you as well. And to our viewers, thank you very much for your interest.