Managing Director, Global Head of Network Management, Private Banking, Credit Suisse AG, Zurich
Not many people have attained the psychotherapeutic nirvana of a fully integrated life and personality. But Heinz Fischer, managing director and head of global network management at Credit Suisse in Zurich, is one of them. From each of his passions and every phase of his life, he detects influences that have helped him to perform better at what he has become. An adolescent enthusiasm for sports of all kinds gave him the ability to adapt quickly to work in a variety of business areas; a near-fatal accident at an early age made him think clearly about what was most valuable to him in life and what he wanted to achieve; and working in foreign countries has persuaded him of the tremendous value that can be gained from cultural diversity. A small industrial company in the region where he was born 50 years ago – with a population of less than a thousand – gave Heinz Fischer his first job and provided him with lessons he has not forgotten today. “We experimented in the manufacture of machine tools used to make components for watches, rockets, submarine boats and even the human body, which could later move into mass production,” he recalls. “It was similar to banking, in the sense that we were always looking for the best quality, lowest cost and most reliable and sustainable way of taking a product idea from A to B. That experience greatly influenced my approach to my work at Credit Suisse later in life.” Even now, Switzerland is a country wise enough to recognize that a challenging apprenticeship can be just as valuable, if not more valuable, than a university degree, and after school Fischer spent the 4 years between the ages of 16 and 20 learning how to be a precision engineer. But he did not go directly from precision engineering to banking, or even for that matter to university, for Switzerland is also a country that retains compulsory military service. His ambition on entering the army in 1980 was to use the experience as a springboard for a course and career in his first love: sport. By the time he started his military service, Fischer was highly proficient not only at downhill skiing – that, after all, comes with the territory – but also at soccer and track and field events.
However, just as he was poised to attain the rank of lieutenant toward the end of his first year in the Swiss army, Fischer suffered a serious accident. He was thrown from a military truck, breaking bones and tearing apart all ligaments in both knees, forcing on him a series of surgical operations to rebuild his broken body. There followed 6 weeks in hospital and 8 weeks in a wheelchair. For 10 months, he was completely unable to work at anything. “I had to learn from scratch how to walk properly again, and not like a robot,” says Fischer.
It was 1983, and he was just 21 years old. “It resulted in being in a wheelchair, unable to work, for a long time,” he recalls. “It also obviously meant that I could not become a sports teacher, or go back to the precision engineering industry.”
For a young guy with ambitions in the sports field, it was a real blow. Sitting in a wheelchair, and seeing what it could mean for your life, prompts you to do some serious thinking. “I asked myself a lot of questions about what it meant for my life, why it had happened, what was important to me, and what the next steps would be.” In the end, he went back to a multilingual, higher commercial school for 2 years, and in 1986 joined Credit Suisse. He spent the first year on its international securities training program, which consisted of studying and on-the-job training in the departments of various securities operations within the bank. “We spent, for example, 3 months in corporate actions, followed by a period in settlements and then in accounts management,” says Fischer. “For a year, I had a real mixture of on- and off-the-job training in all aspects of the back office. It gave me the background knowledge I still draw on today.”
It was 2 or 3 weeks before his departure for a 1-year assignment in London, in early 1989, that something happened to fundamentally change the course of his career at Credit Suisse. “Human resources, together with my line manager, approached me with a very interesting offer of a position in Japan. They needed me to start work as soon as possible – so were understandably keen for me to get back to them promptly with an answer,” Fischer explains. “It all happened very quickly. That evening I had a discussion with my parents and my fiancee, and the next morning, at 7 a.m., I called my HR partner with my answer. It was ‘yes’! I can’t pretend that I didn’t feel rather apprehensive about accepting an assignment on the other side of the world, but at the same time I recognized that it was a tremendous opportunity. I was also honored to have been asked.” A week later, Fischer found himself at Narita airport, trying to identify the right bus that would take him into town from a baffling array of Kanji signage. At the Credit Suisse office in Tokyo, despite the initial language barrier, he and his team succeeded in handling the growing volume of outbound business conducted by the trust and securities department of Credit Suisse Trust Bank in Tokyo, including a large share of the then-booming Japanese equity warrants business that was being transacted with retail investors back in Switzerland/Europe. From a cultural and linguistic perspective, it is hard to think of a more challenging assignment in banking for Fischer. And life outside the office also took quite a bit of getting used to, as he was without the company of his fiancee, at least for the first 4 months. But Fischer had demonstrated to his line managers that he possessed the necessary skills – including determination and flexibility – to rise to the challenge. He had also discovered in himself an appetite for adventure and had landed in Tokyo at the very peak of the Japanese equity market boom, when the country occupied the place in the American imagination now taken up by China. “It was the best and most intense time I have spent abroad,” says Fischer. “It was tough. But it was extremely beneficial to my professional development at Credit Suisse, and I thoroughly enjoyed it.” The assignment lasted 18 months, after which he returned to Zurich. He left behind a multinational team that had grown from three to 18 people, each of whom he had personally trained in the intricacies of the securities services business. He remains in touch with the team today.
The next 2 years were spent in the operations department in Zurich, followed by an intensive training course run by Credit Suisse in a range of business topics in New York in 1992. Fischer describes his time at the school as a highly pressurized crash course in mathematics, economics, statistics, taxation and company financials. Lectures and reading were combined with tests of what the students had learned. On returning to Zurich, Fischer was immediately able to put his new knowledge to good use for the bank, and by 2001 he had been promoted to head of the securities custody operations department, ultimately responsible for a team of 190 people. His department handled all non-trading settlements on behalf of clients of the retail and private bank in more than 60 markets around the globe as well as the Swiss domestic market. The explosion of interest among clients of the Swiss private banks in investing abroad, which Fischer traces back to the years between 1996 and 1998, was the ideal preparation for his subsequent shift into network management. “The person responsible for settlement in foreign markets has to understand more than simply how to exchange cash and securities,” explains Fischer. “They have to understand the tax implications, the documentation requirements and the local rules and regulations.” So when he made the move into network management in 2001, Fischer understood exactly how the business worked at the granular level.
This was just as well, since his appointment coincided with the critical financial phase of market turmoil in Latin America and Asia-Pacific between 1999 and 2002. The job had also expanded, because Fischer was given responsibility for network management for two semi-independent private banks that were, at the time, controlled by Credit Suisse (Bank Leu and Bank Hofmann) and Credit Suisse’s rapidly expanding private banking operation in Singapore. His goal was to support them all from a single platform, to align the providers, rationalize costs and increase the leverage of the buying power of the group over the agent banks – and he achieved it. Over the next few years, Fischer and his team built a global network management platform that enabled Credit Suisse to rationalize its duplicate custody and cash correspondent networks, concentrate its business with a smaller group of agent banks, and standardize its contracts and tariffs with those banks, while allowing Leu and Hofmann to maintain separate and independent accounts and reports. It was an understandably delicate task, in which Fischer was careful to engage Leu and Hofmann employees, and leave existing arrangements intact where it made sense. However, under his leadership, Fischer’s team succeeded in absorbing the separate networks run by the Private Banking and Investment Banking divisions between 2003 and 2006. By 2009, Credit Suisse had developed a single bank-wide network management function, run by separate teams based in London, New York and Singapore as well as Zurich, and covering cash as well as securities. But the changes did not end there.
Buying cash and securities services from the same agent banks is now an established trend, but Fischer used the opportunities created by a single operational platform across all the divisions to extend the scope of network management into all lines of business where Credit Suisse interacts with other banks. “Rather than just looking at things from a securities point of view or from a cash point of view, we always try to take into account other products and services, such as trade finance, commercial payments, cash notes and checks, collateral management. We try to consolidate all kinds of buying activity into a single stream, and often a single relationship.” While it makes obvious commercial sense in terms of leveraging the power of a major universal banking group – not to mention expanding the scope for an active business flow management – this degree of product extension is not easy to execute. “What is good for the stakeholder may not always be good for the different product managers,” notes Fischer. Most obviously, product extension in network management entails securing senior management support – up to the very senior level in some cases – as well as getting close to the product heads in different areas and regions. It means confronting interests within the bank, absorbing people from different backgrounds and with different skills, mastering unfamiliar products, processes and regulatory regimes, controlling who is paying and being paid across multiple products, and delivering all of the services on a global scale, around the clock. “If I compare what we are doing today with what we were doing 10 years ago, the traditional job of a network manager no longer exists,” says Fischer. “Within a single global network management function, we have identified more than 60 separate roles, ranging from the management of IT systems to the management and control of investment quotas. Some 60-70% of our work today is about market intelligence on legal, compliance, business risk and taxation matters.”
The work is certainly more diverse than the traditional bifurcation of network management work between the clearing clients and the buy-and-hold clients. “Clients of Credit Suisse Prime Services, or ultra-high-net-worth individuals for example, are not just looking for clearing and settlement services,” says Fischer. “They are looking for information on how markets work, market profiles and market intelligence, local tax and stock registration information, account setup procedures, the ability to segregate accounts, and so on. Another example would be our microfinance group seeking to invest in Africa; we would find ways of helping them to do that. The modern network manager has to know not just about internal processes, but also external processes, and to have a good understanding of products. We are a hub that facilitates the entry of the bank into the markets of the world, but we also have to support the relationship managers, the traders, the risk managers, the tax managers and the legal and compliance department within the different divisions.” Fischer concedes that these wide-ranging demands have forced Credit Suisse, even at a time when many banks are looking to diversify their counterparty credit risk, to concentrate its business with a certain number of agent banks. It is essential that these agent banks are in a position to provide Fischer and his colleagues with accurate and timely information about multiple product areas, take on work in fields far removed from cash and securities and handle local regulatory and infrastructural issues. To manage the consequent credit risk of working with a smaller number of banks, Fischer is careful to keep relationships open with alternative providers. He has also turned his comprehensive view of the business or market risk as well as interbank flows generated by all the banks’ businesses to advantage by consolidating and netting flows with the same counterparty, and internalizing intra-company flows that previously passed through third-party banks.
This is network management, but not as we used to know it. If a major source of transactions such as Credit Suisse is not only concentrating its volumes with fewer agent banks, but also looking to consolidate and net its flows with those banks into single net amounts on both the cash and the securities sides of the business, it does not bode well for the revenue and profitability of the sub-custodian banks. Unsurprisingly, Fischer is not especially optimistic about the implications of these developments for them. He notes that means of survival are proving increasingly elusive for standalone providers in Europe and even Asia, where there is nothing akin to the prospect of T2S to accelerate the concentration of business with a smaller number of agent banks. “It could become challenging for local providers, because they are also facing competition from their local CSD, not just on settlement but asset servicing as well,” explains Fischer. “CSDs are being asked to move up the value chain and, as they do so, network managers are asking themselves why they should still use a local bank instead of leveraging a regional operating provider.” Like any network manager, Fischer says he never looks for the lowest price alone. Rather, he wants the optimum combination of cost, service and flexibility in an offering. But the service expectations of network managers like Heinz Fischer were never higher, not only in terms of performance to SLAs, but in terms of knowledge of the local market, influence within it, and command of sophisticated as well as simple products. This is why he has created regional network management teams, so that knowledge and experience gained in one market can be shared with clients and agent banks, based on the corresponding market intelligence. “We have more and more direct contact with law firms or tax consultants in local markets, not to question what we or they are doing, but to pool our expertise with them on how a market might react if they make a change to the rules or regulations,” says Fischer. “Compared to when I came into the network management business in 2001, the level and variety of knowledge required of network managers has expanded exponentially.” Fortunately for Credit Suisse, nobody is less likely to forget what he has learned and experienced throughout his varied career – or more eager to share and gain new knowledge – than Heinz Fischer.