Geneva, Switzerland (GenevaLunch) - Financial executives who say the end is in sight are "overly optimistic – things continue to be pretty challenging in the markets," says Brady Dougan, CEO of Credit Suisse Group. The first two quarters of 2008 will see banks continuing to focus on risk reduction, with  "estimates that writedowns related to the subprime mortgage sector alone will total $250 billion." That figure might sound staggering, but "writedowns at the three global institutions hardest hit by the crisis had already exceeded $100b at the end of March."

A key element in risk reduction is shifting away from mid-term returns on funds, what Dougan refers to as the bar bell: "Long-term is okay, very short-term is ok, but the timeframe on medium-term has changed. We have dramatically shortened times on money market funds." In seven days the bank can now get back 50% of these funds.

Dougan’s remarks were made Friday to a group of business leaders and bankers,
the American International Club of Geneva, about his
bank and his industry in the wake of the financial crisis which developed only six weeks after he took the helm at Switzerland’s second
largest bank. "The industry won’t be returning to business as it was," he emphasized. "Without a doubt, the reputation of our industry has taken a beating. The financial industry will be under scrutiny from shareholders, regulators, clients and the public to address the issues raised by the crisis."

Part of the change could come in the form of greater regulation but
governments are moving cautiously, and "rightly so," he believes
because an over-zealous approach could reduce banks’ abilities to
foster economic growth just as it is most needed. The greater change
could well come from within the banking industry. "It’s time for us to
address the issues raised by the increasing complexity of financial
instruments and investment products."

Dougan called for "greater
transparency and understanding of sophisticated financial instruments
and more effective assessment of related risks," cautioning, however,
against too much government intervention to make that happen.
"Innovation is the lifeblood of the industry." It all comes down to
discipline, focus and creative individuals, he says.

Photo: Patrick Odier, left, Geneva private banker, and Brady Dougan, right, CEO of Credit Suisse

Swiss bankers in the room expressed their concerns about the
country’s reputation in the wake of the financial crisis. Huge losses
at UBS and Credit Suisse made headlines
worldwide.

American Dougan was upbeat about Switzerland. "I actually think that
Switzerland, as a country, as an economy, has done a better job than
almost any other in the global economy." He pointed out that for every
one employee in Switzerland there are two outside the country. "I don’t
think there is any other country that can say that," he grinned. He
advised his audience to remember that "Switzerland probably has the
strongest global brand, certainly for financial institutions," and the
important thing is to keep that reputation. It may also be the hardest
thing, he cautions.

For its part, Credit Suisse is returning to the longer term, more
cautious approach for which Swiss banks were once famed, particularly
in emerging markets. "We’re trying to watch emerging markets carefully,
taking a fairly conservative position." The trick, in general but
particularly here, Dougan insists, is getting the balance right. "I
think we want to be very aggressive about developing these markets to
help drive growth. But this requires a longer term perspective and a
focused approach to the players in those markets, to help them develop.

"We think of ourselves as part of the fabric of those countries."

The brand might be Swiss but the message was pointedly international.

You can leave a response, or trackback from your own site.