By Conrad Tan

HE walks into the Singapore office of Credit Suisse at One Raffles Link and immediately apologises for being a few minutes late. 'We Swiss must always be on time,' jokes Walter Berchtold. The man is friendly and at ease with himself despite being rushed from one appointment to another on a visit to the Singapore office - as you might expect with the head of one of the world's largest private banking groups, which prides itself on treating its clients with respect while attending to every conceivable banking need they may have.

Mr Berchtold has spent 26 years - virtually his entire working life - in various roles at different units of what is now the unified Credit Suisse group, headquartered in Zurich.

Born in 1962, he started his career in the Zurich back office of London-based investment bank Credit Suisse First Boston (CSFB) after graduating with a commercial diploma. Soon after he transferred, as a trader in precious metals and currency options, to its Geneva unit, where he was later made head of its Japanese convertible notes trading team.

In 1991, he changed companies, moving to Credit Suisse - then run separately from CSFB, a 50-50 joint venture between Credit Suisse and US investment bank First Boston - and was put in charge of its trading unit. 'At the time it was a big change, coming from an Anglo-Saxon investment bank to a very traditional Swiss bank,' he says.

Five years later he moved back into CSFB, after Credit Suisse took full control of First Boston in the US and expanded the CSFB name to encompass all of the newly enlarged Credit Suisse Group's investment banking operations. He was made head of trading and sales for CSFB's Swiss business and later appointed country manager of CSFB in Switzerland.

In 2002, as the group consolidated further, he moved into its private banking unit, still as head of trading and sales. After the group restructured itself in 2006, he was made chief executive of private banking, responsible for the group's wealth management operations worldwide and its corporate and retail banking business in Switzerland, where it has some 220 branches.

'I don't regret a single year,' he says, chuckling as he looks back on his lengthy career with the 152-year-old banking group.

The experience has left him with an insider's view of the lessons to be learned from the crisis sweeping through the banking sector and financial markets worldwide.

Asked if the one-bank model - in which investment banking, wealth management, asset management and retail banking are kept under one roof - is fatally flawed, he says emphatically: 'It's not.'

Criticisms blaming the way a bank is structured for encouraging excessive risk-taking are 'the wrong arguments', he says. 'It is the failure of risk management and decision-taking. That has nothing to do with your business model.'

He was speaking to BT just days after Fannie Mae and Freddie Mac, the US mortgage finance giants, were seized by regulators in a massive government bailout, and as officials convened a desperate meeting with Wall Street's top bankers to discuss the future of Lehman Brothers, the tottering US investment bank. That same weekend, Lehman crumbled, while its larger rival Merrill Lynch sold itself to Bank of America, a major US commercial bank. A week later, on Sept 21, Goldman Sachs and Morgan Stanley - the last two independent investment banks on Wall Street - agreed to give up their independence in exchange for funding support from the US Federal Reserve.

Perhaps coincidentally, the most recent bank collapses on Wall Street appear to support Mr Berchtold's view that a bank's structure matters less than how it manages its risk and allocates its capital.

Well before Lehman, Merrill and American International Group, the US insurance giant, succumbed to the crisis of confidence sweeping through the financial sector, critics lambasted large, 'universal' banks such as Citigroup and HSBC for being too big and unwieldy, with some investors calling for them to be broken up.

Last month, Credit Suisse's biggest and most immediate rival, UBS, said it would split itself into three separate business units - wealth management, investment banking and asset management - after it announced a second-quarter net loss of 358 million Swiss francs and net outflows of 17.3 billion francs from its wealth management businesses as clients withdrew money or closed their accounts.

UBS chairman Peter Kurer said in a statement at the time that a review of the group's strategy had 'clearly revealed the weaknesses associated with the integrated one-firm business model', including 'the blurring of the true risk-reward profile of individual businesses' and 'the creation of excessively elaborate processes and unnecessary layers of complexity'.

But the latest wave of fear sweeping the US and Europe has consumed firms of all kinds - Lehman, a standalone investment bank that shrivelled after its sources of funding dried up; AIG, an insurer not even supervised by banking regulators, which buckled under the weight of massive losses from credit-derivatives insurance contracts sold by its financial services unit; and HBOS, a British commercial bank that took deposits from retail customers but had to be rescued by rival Lloyds TSB after investors took fright and pummelled its share price.

In contrast, Credit Suisse has fared better so far, despite also having suffered billions in writedowns due to the credit crisis and a trading scandal earlier this year. After reporting a net loss of 2.1 billion francs in the first quarter, the group returned to the black in the second, with a net profit of 1.2 billion francs. Net new money inflows to its wealth management business worldwide rose to 15.4 billion francs in the second quarter from 13.3 billion francs a year earlier and 13.5 billion francs in the first quarter. Unlike many of its rivals, it has also not needed to raise new equity capital that would dilute the stakes of existing shareholders.

For Mr Berchtold, the arguments for and against universal banks that combine various institutional functions such as investment banking with retail banking and private banking for individuals tend to focus on different aspects of the issue.

When it comes to those in favour of breaking up universal banks, 'you have arguments which have a lot more to do with risk management', he says. 'Maybe there is an argument that if you break it up, you're better off in terms of managing risks because you have a clear responsibility. I think you can either integrate it or split up - the risk management angle will be always the same.'

His own experience at Credit Suisse, which fully embraced the integrated one-bank model only in 2006, lends some useful perspective here. 'We've been operating in (separate) business units in the past and risk management didn't work better at the time,' he says.

'You have to differentiate clearly the arguments here. My argument for the one-bank is about the client. Our client wants to have access to all the resources of the bank. He is on one side a private-banking client giving us assets to manage, and on the other side he's a corporate client who wants access to capital markets or even private-equity direct investments. For me, it's a question about what the client wants, and that speaks in all aspects for the one-bank.'

What about the criticism that investment banking units encourage a culture of excessive risk-taking within the broader group?

That's a question of risk management 'and risk management has nothing to do with the structure of your bank - it's something to do with intelligence when it comes to numbers, but also taking the right decisions at the right moments'.

Ultimately, senior managers must take responsibility for decisions to drive a bank in any particular direction, regardless of pressure from lower ranks, says Mr Berchtold, who also sits on the 12-member, top-level executive board of the Credit Suisse group. 'That's what we're there for.'

'It depends on how you steer the bank. The way we steer the risk is by allocating capital. You can give more or less capital - this is how you do it. You will have to do it whether you use a one-bank or a business-unit model. This is always the same task - you have to justify to shareholders how much capital you allocate to risk areas and the structure of the bank doesn't take that decision away from you.

'At the end of the day, what you really need to do in risk management is to really understand markets and make certain market calls. And I don't think a model can take that away from you. You need to have the right checks and balances and when you make a decision you need to make sure that it's getting implemented throughout the organisation.

'When it comes to technicalities, the industry pretty much knows how to measure risks - statistically. But to put it in place, translate it into the real world - this is something the management has to do. This will never, ever be taken away by a mathematical model.'

How long does he think the current crisis will last?

'We are not through the woods yet. The industry will have to resize itself. When we reach that stage when new models are pursued - whether we need to be that big, certain parts are sold off that are non-core - when that is getting in motion, then I think we are through the crisis.

'But this hasn't really sunk into the industry yet. We still have to do a lot more balance-sheet repairing. There is still some more fallout to come, still some positions which need to be re-evaluated.

Still, 'what makes me more confident than half a year ago is that finally everybody has realised that we are in a crisis', he says. 'This is already a good thing.'

'I would reckon that somewhere in the first half of 2009 we will slowly but surely come out of it. And then you will see a lot of activity in the financial industry, because we have new CEOs almost everywhere. They will come up with new strategic initiatives.'

Apart from reassuring anxious clients about the value of their assets and the strength of Credit Suisse's balance sheet, his army of relationship managers is also being marshalled to show clients investment opportunities that are likely to arise from the ruins left by the current financial market turmoil, he says.

'There are short-term opportunities in the credit world. Other great opportunities are some of the stocks that are truly global players, that have great products, great distribution franchises - that are retreating to very reasonable pricing in terms of PEs (price-to-earnings ratios).

'These are opportunities for people who have been holding back to make very valuable investments.'

And 'if you want to buy a luxury apartment - it's certainly getting cheaper than it was one year ago', he says, laughing.

For banks themselves, opportunities also abound for those that know where to look. 'There is going to be a lot of restructuring on the credit side - so that's one area. There's going to be a lot of M&A (mergers and acquisitions) transactions coming up - that's another area,' he says.

'Equity markets will eventually come back, capital markets will reopen again. And on the fixed-income side, I'm sure there will be new businesses created around the current crisis. There's trillions of dollars of paper floating around - someone will take care of it, start bundling it.'

For that reason, 'today, thinking about investing in people who have expertise in credit markets is probably a very good thing, because that's where a lot of value is floating around and that's where I think a lot of opportunities will arise', he says. And 'slowly but surely', even leveraged buy-outs or LBOs that rely on cheap credit for funding deals will come back when credit markets reopen, he believes.

But the immediate priority for most banks over the next six to 12 months will be to restore revenue streams and profitability, he says.

'All these areas which have resulted in big writedowns - RMBS (residential mortgage-backed securities), CMBS (commercial mortgage-backed securities), LBOs and so on - have been tremendous pools of commission income and those pools have evaporated. The industry needs to find new pools to replace that.'

In wealth management, the main challenge is finding the right balance between making additional investments - 'because wealth management for sure will come back' - and increasing productivity by finding ways to be more efficient.

The Credit Suisse group had 3,370 relationship managers worldwide at the end of June, and Mr Berchtold plans to hire another 1,000 or more over the next three years.

To get the additional RMs he needs, he will be looking at 'experienced relationship managers from other banks', as well as corporate bankers who can then be trained as RMs. 'We hire a lot of investment bankers who are especially strong when it comes to the one-bank coverage model,' he says. 'We do a little bit of everything, because in all fairness, to find a thousand qualified RMs from competitors is a very difficult task.'

This article was first published in The Business Times on September 27, 2008.