Behind the profit warnings and rights issues that have dominated the foreground of the banking industry this year, Credit Suisse has quietly instigated a shake-up of its European business that has already seen several veteran bankers leave its investment bank or move to new roles.
The new dynamic follows the arrival in February of Eric Varvel, a US citizen, as chief executive for the Swiss bank in Europe, the Middle East and Africa. Mr Varvel may be a Credit Suisse veteran himself, but his promotion marks the first time he has worked in Europe, and insiders say that his first 100 days have been characterised by a single-minded, unsentimental approach to challenging the status quo. Mr Varvel inherited a somewhat rudderless division which had, in common with other banks, taken on additional cost during the bull market that ran until the middle of last year.
The leadership of Credit Suisse’s European business had also been ambiguous since the beginning of 2007, when Michael Philipp, its then regional chief executive, handed over Leonhard Fischer only to see Mr Fischer quit less than a month later. Mr Philipp then took the job back in an acting capacity until Mr Varvel’s move earlier this year.
The immediate visible changes under Mr Varvel have been cutbacks at the very top of the European business, eliminating a raft of senior positions so that local management in the region has more power and is left reporting directly into him.
Credit Suisse previously had a chairman for the Middle East, a chief executive for the emerging markets in Europe, Middle East and Africa, and two co-heads for the Middle East and North Africa. It also had a dedicated UK chief executive who nevertheless did not handle the firm’s relationship with the UK financial regulator because that was the responsibility of the European chief executive.
Today, the business in the Middle East is run by two co-heads who report directly to Mr Varvel, while the responsibilities of the UK chief executive, such as they are, have been reassigned to another banker who appears to be keeping most of his existing duties too. Other top bankers have also been moved out of overlapping roles into more clearly defined titles. “[Mr Varvel] has an incredibly thick skin. He is a tough manager and is not the sort of person who is going to be bothered by what people think about him,” says one Credit Suisse banker.
Meanwhile, Mr Varvel has appointed a dedicated chief executive for the business in Germany and central Europe, and further regional executive appointments are expected.
In “town hall” meetings with the bank’s top brass, Mr Varvel has flagged that the changes made during his first three months are a prelude to more to come. His plan is only partly about cutting costs, according to a person who has attended the meetings. It is also about a broader push to give more power to regional business heads “closer to the coal face and not sitting in London” so that the local bankers know who to call to get something done – and, above all, know who is in control of their bonus pool.
One aim is to make Credit Suisse better able to compete in Europe’s emerging markets – in particular Russia and the Middle East – where local firms such as Russia’s Troika Dialog are benefiting from leadership by people based in the same country in which they do business.
Another goal is to ensure that when a piece of business comes in through one part of Credit Suisse, for example a mandate to sell a company owned by a private banking client, there is an immediate recognition of the other opportunities that may stem from that, whether for the investment bank, the private bank or the asset management unit.
But Mr Varvel can also be seen as the latest Credit Suisse executive who has chosen to tackle a longstanding perception that the bank is a breeding ground for fiefdoms that protect the interests of a small handful of bankers at the expense of the wider firm. In executing his strategy, Mr Varvel has the twin advantage of knowing Credit Suisse well – he has been with the bank since 1990 – while also lacking any emotional attachment to its European business. A US citizen, he came to his new role after 15 years with Credit Suisse in Asia, and three in New York.
Above all, he has the advantage of a weak market. Bankers who resist his drive to make regional management both more powerful and more accountable know that the alternative to being given a kick up the backside is probably having no job at all.