Chief executive officer, United Bank of Switzerland
Born: February 8, 1950, in Basel, Switzerland.
Education: School of Economics and Business Administration, BS, 1977.
Career: Swiss Bank Corporation, 1977–1980, member of Department of Planning and Marketing; SBC International, 1980–1984, member of capital markets division; Merrill Lynch Capital Markets, 1984–1987, managing director; Swiss Bank Corporation, 1987–1995, director of securities trading and sales; 1995–1996, chief executive officer; 1996–1998, president and group chief executive officer; United Bank of Switzerland, 1998–2001, group chief executive officer; 2001–, chairman of the board and director.
Address: United Bank of Switzerland, Bahnhofstr.45, 8021, Zurich, Switzerland; http://www.ubs.com.
■ Marcel Ospel began his banking career with the Swiss Bank Corporation (SBC) in 1977. He spent the next few years working on the international banking scene before leaving SBC in 1984 for a position with Merrill Lynch, where he remained for three years before coming back to the Swiss bank, where he rapidly moved up the ranks within the company. He spent five years overseeing securities and trading before becoming a member of the executive board in 1990. His success with mergers brought him the title of chief executive officer in 1995. Ospel was credited with turning around SBC. When SBC and Union Bank of Switzerland merged in 1998 to form United Bank of Switzerland, Ospel became the CEO and received criticism for not making a smooth transition in uniting these two very different banks. Analysts continued to watch Ospel closely as turnover among top executives became a regular occurrence and as industry insiders blamed Ospel's management style for problems within the largest of Switzerland's banks.
When Ospel turned 16, he was given two choices for the next stage of his life: he could continue with his schooling, or he could take a job with a small bank in Basel, Switzerland. He decided to take advantage of Switzerland's apprentice pro gram, in which he worked for the bank for three years while attending school.
His first job in the late 1960s consisted of going every day to the stock exchange, where he learned firsthand about the stock market from the bottom up. He ran around the ex change floor with pieces of paper to aid in his company's arbi tration with foreign exchanges. When his three years ended, he went to Geneva and worked in the trading division of a private bank. He decided after a short time that he should attend school, so he went back to Basel and completed a three-year degree at the School of Economics and Business Administration before beginning his career at SBC in 1977.
Ospel worked at SBC for seven years before leaving for a position with Merrill Lynch, where he received much of his training in the American style of banking. He returned to SBC 10 days before the stock market crash of 1987. He was in Hong Kong on the day of the actual crash and learned of such risk management strategies as derivatives at that time. Ospel began to restructure SBC's decentralized operation to include a risk management sector, and he started to develop relationships with companies that would later play an important role in his rise to the top of SBC's management.
In 1990 SBC held the unfortunate title of being the weakest of the three top banking firms in Switzerland, with a less-than-average international operations sector. Under Ospel's guidance as the director of securities trading, SBC began a program to turn its image around.
In 1992, when SBC bought O'Connor, an American options trading firm, Ospel oversaw the selection of O'Connor's partners as top managers in SBC. At the time, Ospel ran securities trading and hoped that the placement of people he called "O'Connorites" would help SBC increase its expertise in derivatives. Ospel wanted the O'Connorites to transform the lagging international sector of the company.
However, analysts thought that Ospel had acted with little thought as to whether the partners from O'Connor could handle a beast as large as SBC. They did create a strong derivatives sector but did not understand the nature of luring clients to SBC. By 1994 SBC showed weak revenues when the market hit a slump. Analysts blamed the problems on the O'Connorites' lack of experience and understanding of the market. However, these difficulties did not stop Ospel from looking for another merger.
Ospel studied the markets in both the United States and Europe and at first believed that a move on an American company would make the most sense. However, Ospel began receiving reports that Wall Street looked unstable for the future while Europe seemed poised to enter into a period of privatization and corporate restructuring. When S. G. Warburg, a British investment bank, quit negotiating a deal for a merger with Morgan Stanley, Warburg became Ospel's choice in 1995 for acquisition.
Industry insiders said that the move was risky because of the size of the merger, which brought together 11,000 employees, a feat never before attempted. Ospel was also criticized for not attempting to merge the differing cultures of the two banks. Warburg emphasized the client rather than the deal while SBC focused on the deal rather than on the client. Ospel responded to those claims by stating that the differences were not so great, and he moved to complete the integration as quickly as possible. He stressed that a change of culture could not be forced, allowing the Warburg staff to acclimate at its own pace.
Ospel announced the immediate dismissal of one thousand staff, with most of the layoffs in the equities and settlements departments. Ospel completed the dismissals quickly and had determined which staff to keep before the finalization of the merger. He and his management team conducted interviews and kept to a format to minimize subjective criteria as a basis for the layoffs. This move generated a reaction from the War-burg staff, with three hundred leaving within the first months of the merger, a circumstance Ospel downplayed by stating that such activity was normal after a merger of this type.
However, with the merger came success for SBC and notoriety for Ospel. By 1996 SBC ranked number one in certain areas of the Swiss banking world and had become a major player in derivatives in both European corporate finance and international equities.
Ospel's appointment as CEO of SBC came with both controversy and success. In 1995, less than six months after he had persuaded SBC to purchase Warburg, Ospel replaced George Blum as CEO.
Industry insiders said the move indicated that SBC wanted to focus on its international banking operations since Swiss opportunities remained limited in an oversaturated market. Ospel's background with Merrill Lynch put him in a strong position to fit with the new emphasis.
Within three years Ospel announced another major merger. Analysts applauded the move because it combined two Swiss banks, SBC and Union Bank of Switzerland (UBS), into one entity. Analysts hailed the deal as positive because it lessened the glut of banking institutions in a saturated market. The new company became known as United Bank of Switzerland.
This merger also received praise because it took the weakest of Swiss banks, UBS, and combined it with one of the most vital of Swiss banks, SBC. Analysts said that the merger represented a move to make headway into the large profits enjoyed by English banks. The merger cut the costs of the banks' retail networks while allowing them to share the costs of a global banking operation. Industry insiders predicted that UBS would become a major presence in the world of international banking. Ospel was named CEO of the newly merged bank because of his success in turning SBC into a powerhouse among European banks.
The merger created a balance sheet of $625 million, forming a situation for Ospel that he had not yet encountered. Ospel was further challenged by the differing cultures of the two institutions and excessive overlap of divisions, which would require trimming to keep down costs.
Ospel announced that problems would not have time to develop because he planned to integrate the two banks fully on a 12-month schedule for the investment banking and institutional asset management divisions. He estimated one to two years for the integration of the private sector part of the corporation. Analysts noted that Ospel's success depended on the qualities of the management team he assembled to deal with the transition. Ospel chose the former CEO of Union Bank of Switzerland, Mathis Cabiallavetta, as chairman of the new bank. It was reported in Institutional Investor that Ospel wanted Cabiallavetta because he was "a fast-taking, no-nonsense manager who headed his bank's trading and sales, risk management, and group treasury functions for five years before becoming CEO in 1995" (January 1998). Ospel saw Cabiallavetta as someone who could integrate people and company structures. It was also noted that the two men were close personal friends who enjoyed playing chess.
The praise for Ospel's genius in creating UBS was short lived. Within two years analysts were declaring that the merger had failed and so had Ospel. It was reported in 2000 that some analysts and investors in London wondered whether UBS could even continue, citing the large number of giant European financial institutions. They announced that breaking apart UBS might be the best strategy.
The investment and private banking operations showed poor performance by 2000, and stock prices had dipped 1 percent from 1999's level.
Chief among the criticisms of Ospel was his inability to combine the two very different banking cultures involved in the merger. Union Bank had strong ties to the Swiss Army elite while SBC's top management held less privileged backgrounds. Fights began as soon as the merger occurred.
As a result, Ospel announced a restructuring of the bank in early 2000, particularly because of the dismal reports from the private banking sector. He fired managers who clashed with others within the company, including Rodolfo Bogni, an Italian who did not meld into the Swiss culture. Analysts said that Ospel was making moves in the right direction but predicted that he did not have much time to realize the benefits of the restructuring.
BusinessWeek reported that a Swiss analyst "gives Ospel six months to show progress. Otherwise, he says, shareholders will demand Ospel's ouster, maybe even the bank's breakup" (March 6, 2000).
Even though Ospel's goal in 1997 had been for the private banking sector to run the profits machine at UBS, by the third quarter of 1999, reported in March 2000, earnings from private banking had fallen by $397 million from the previous year. The losses grew, and Cabiallavata resigned. Even though UBS was considered one of the world's largest banks, with $1 trillion in assets under management, its losses in the private banking section took a beating. In July 2000 UBS announced that it had dropped 18 percent in the quarter ending June 30, 2000. However, its overall operations in 1999 showed that net income had doubled from $3.9 billion, despite a 39 percent decrease in profit in private banking and the loss of many large clients in the asset management division.
Ospel's critics accused him of being unable to make decisions, causing the share price to drop considerably. They said that he had rested on the praise heaped upon him early on, and even though he was only 50 years old in 2000, some felt he was acting as if he were ready for retirement. However, Ospel did take immediate measures by firing the head of the private banking division and implementing a major restructuring of that unit.
Morale dropped among employees as a result of the dire predictions for UBS in the media. Many of the sectors feared that they would be either sold or closed. In 2001, when some of Ospel's strategies had begun to pay off, he commented on the dark days of 2000 to Euromoney magazine: "The last four months of last year were obviously a very difficult period," he said. "As well as merging the businesses and running them, we had to overcome these new types of shocks which created disappointments both internally and externally" (June 2, 2001).
Ospel announced in 2001 that the international portion of the merger was completed and that the final touches on the Switzerland integration would be finished in mid-2001. Ospel viewed the markets according to the definitions he had learned while working for Merrill Lynch. Asset management, private banking, and securities and capital markets became separate and distinct divisions within the large corporation. The purchase of PaineWebber Group for $12 billion in 2000 also boosted the company's place in the banking world in the United States. However, not all analysts saw this move as one that would help UBS since PaineWebber was not one of the top institutions for an American acquisition.
Ospel also repeated a strategy that had been successful with SBC in the 1990s. He announced plans to shrink the loan book from Sfr 270 billion to Sfr 60 billion, which emphasized the move away from UBS's classification as strictly a commercial bank. Ospel said that making loans to clients was not the driving force behind a bank such as UBS.
Ospel again made the news late in 2001, when he fired UBS's British president, Luqman Arnold, because of a difference of opinion. Industry insiders said that Arnold had been unable to offer a bridge between his bosses in Switzerland and executives on Wall Street.
The New York Times reported that major dissension came when Arnold went against Ospel's wishes and did not approve a loan to Echostar Communications, even after advising the client to go ahead with a lucrative acquisition. The paper reported, "It was Mr. Arnold who opposed making the loan, executives at the bank said, despite support for the deal from the UBS chairman, Marcel Ospel. In an embarrassing twist for UBS, Echostar won the bidding, but ended up giving the financing to two archrivals of UBS" (December 19, 2001).
Some industry insiders blamed Arnold's quick dismissal after only seven months on rumors that had surfaced about Arnold's desire to take over Ospel's position on the board. Investors expressed surprise at the announcement as shares dropped 3 percent. One investment banker with UBS said that not even rumors had been whispered about the firing in a business in which gossip is easily spread.
Ospel received much criticism for a decision he made in 2002 regarding a rescue package for Swissair. Analysts said that Ospel and the head of Credit Suisse, Lukas Muhlemann, interfered with a process that led to a quick downfall for the Swiss airline. They were blamed for not balancing their international aspirations with local obligations.
Ospel in particular was blamed for making a commitment to bail out Swissair with a rescue package of $860 million late in 2001. Industry insiders said that he should have gone to the board. It was reported that the board chastised him for failing to keep his directors informed of his actions.
Ospel broke the rules not only in Swiss banking circles but also with his own management style and personal characteristics. While working with Merrill Lynch, he established a style resembling that of a U.S. investment banker.
While Ospel loved a nontraditional style of dress and office accoutrements, his colleagues sometimes described him as quietly thoughtful. In his first years as CEO of SBC, he was described as a leader who delegated and encouraged his employees. Ospel believed that in a corporation as large as SBC, an autocratic, centralized management style would be impossible to maintain. He also said that as the CEO, he was not skilled in every area of the business; therefore, placing key individuals with the proper experience was key to running a company like SBC.
His policy of no dress code at SBC earned the bank and the banker the reputation of having a unique style in the more conservative banking culture. Ospel said that a dress code added nothing to the company except to make employees uncomfortable by requiring them to wear a tie.
However, it was his knowledge of the inner workings of financial markets and an emphasis on strategies and management that received much of the attention in the late 1990s.
When Euromoney interviewed him in 1997, Ospel said he knew that his life would change after the Warburg deal. He had worked hard at analyzing the market before suggesting the merger but had finally determined that the European market looked better in the future than Wall Street. Ospel said in the interview, "So we were primed to do some type of a corporate deal, either in the States or in Europe. I knew that would completely change my professional and personal life. I might have ended up in London or New York. But I'm a mobile person and flexible about these sorts of things" (April 1997).
Despite agreeing to the interview with Euromoney , Ospel maintained that bankers should always keep a low public profile, leaving a high-profile lifestyle to the politicians. He also stressed intellectual honesty as the attribute most important to him in an employee, surrounding himself with successful individuals with strong ethics.
By 2000 Ospel had begun losing his reputation as a fair employer and delegator. The press criticized him as being an active president and not clearly defining other positions within the company. He was accused of surrounding himself with people who agreed with him without considering their abilities in international banking.
Euroweek painted an unflattering picture of Ospel as a leader who filled positions at UBS with his friends and admirers, reporting that dissension was not allowed, and "when you pass the great man, you no longer say, 'guten morgen, Herr Ospel,' but 'Hail Caesar!'" (February 22, 2002).
Industry insiders hinted that Ospel did not enjoy sharing power and that his desire for control led to many of the problems with management from 2000 to 2002.
See also entry on Swiss Bank Corporation in International Directory of Company Histories .
Andrews, Edmund L., "International Business; Swiss Acquirer Has Had Plenty of Its Own Problems," New York Times , July 13, 2000.
——, "UBS Ousts President After 7 Months in Job," New York Times , December 19, 2001.
Evans, Garry, "The Ospel Interview," Euromoney , April 1997, cover story.
Kerr, Ian, "A Week in the Markets," Euroweek , February 22, 2002, p. 10–12.
Lee, Peter, "The Race Is on for Europe's Nouveaux Riches," Euromoney , June 2, 2001.
"Time Is Running Out for UBS," BusinessWeek , March 6, 2000, p. 46.
"Under New Management: SBC Warburg," Economist (U.S.), November 11, 1995, p. 79.
"Why It's Ospel's United Bank of Switzerland," Institutional Investor , January 1998, pp. 14–15.
—Patricia C. Behnke
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