Newsletter. New Strategy for Executive Education. My first 200 days at SFI. by Prof. Claudio Loderer

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1 Newsletter NR. 10 SEPTEMBER 2011 EDITORIAL My first 200 days at SFI by Prof. Claudio Loderer I ve been, so to speak, in office for almost 200 days now. During this time, I had the pleasure of meeting and talking with various members of the SFI community. I would therefore like to use this opportunity to share a few thoughts. The brightest side of the organization at the moment is academic research. The number of publications we were able to place in the top journals of the finance profession worldwide is quite remarkable as are the outstanding placements of our PhD students. These successes document impressively the exceptional caliber of the individuals who make up our network as well as their extraordinary expertise. The challenge is to tap that expertise and be heard in public debate. Academics are in many ways a group of privileged people. Shouldn t we be more present in policy discussions and contribute also in that way to the society that grants us those privileges? SFI s executive education arm is also performing well, with some very good programs that seem to be highly appreciated. Our ambition is to make SFI the benchmark for executive education in banking and wealth management. INTERVIEW New Strategy for Executive Education At its meeting on April 8, 2011 the SFI Foundation Board approved a new Executive Education strategy developed under the lead of Dr. Gabriela Maria Payer, Head of the UBS Business University and Chair of the Executive Education Advisory Board (EEAB) of the Swiss Finance Institute. : You are the Chair of the EEAB. What is the role of this Advisory Board? The role of the EEAB is to ensure that the Executive Education offered by the Swiss Finance Institute addresses the needs of the finance industry and that the offerings are of highest quality. The board proposes the Executive Education strategy and advises the Foundation Board and the SFI Management on issues and trends in management education. : When you assumed your new role at the end of 2009 you initiated a strategic review of the SFI Executive Eduation strategy for the Swiss market, which has now just been completed. What was the reason for this review? SFI Executive Education is nowadays facing a severely different market environment, than in the past. On one hand the education landscape has changed : competition in the executive education market has increased during the last years, which in turn made a Dr. Gabriela Maria Payer more efficient and balanced cost structure as well as a strong branding and clear positioning of the SFI Executive Education necessary. The Bologna reform, moreover, has fundamentally impacted the education market and has increased the demand for officially certified degrees. And, of course, the financial services industry underwent a fundamental change itself. On the other hand, the EEAB found that the valuable knowledge and research of the SFI Faculty should be more leveraged to help the needs of the banks. >> p.2 >> p.2 1

2 >> >> Editorial As part of that effort, we are restructuring our offering to be able to grant university certificates, diplomas, and degrees. Our partners are the University of Bern, via the Rochester- Bern Foundation, and the Tepper School of Business at Carnegie Mellon University. These partners provide us with the flexibility we need while at the same time guaranteeing the top quality we are striving for. As for Knowledge Transfer, we want to continue and expand the first-rate activities we have in that area. In particular, we are thinking of ways to integrate them in a Knowledge Center (KC). The purpose of this KC is to create a network of experts who can address timely questions by practitioners, regulators, and the media. The KC will interpret its function proactively, divulging relevant research contributions and encouraging a debate between the various SFI stakeholders. This will give financial operators a channel to contribute in shaping the direction of future research. Finally, we are starting a midterm review of what we have done during the past five years and where we want to go. A number of successes have been achieved but, given the recent changes in the financial industry and the upheaval in the world economy, we want to ensure that our strategy is on course and that we are holding ourselves to the highest standards. We also want to see whether there are things that need changing or finetuning. The ultimate purpose is to position SFI for a great future. : What were the main outcomes of the strategy review? The EEAB saw a main disadvantage of the SFI in not being able to award officially recognized degrees for its programs. We have therefore tried to find a University partner who allows us to continue with our wellproven education concept, which brings together a selected faculty of global university professors and industry experts, while at the same time cooperates with us in awarding a University degree. We are very pleased to have found such a recognized and flexible partner in Rochester-Bern Executive Programs and the University of Bern. : How involved were the Swiss banks in deriving the new strategy for the Swiss market? Representatives of all bank groups have been actively involved in the review process via the EEAB and the assembled project group. Together with the SFI management the turn-around has therefore been achieved efficiently. In this context the Advisory Board in a sense became a Strategy and Design Board, which has successfully fulfilled its task and is now going back to its advisory role. : There are many institutions actively offering executive education programs. Where do you see the value and the uniqueness of the Swiss Finance Institute? I see the strength of the SFI Executive Education clearly in its network of high-quality faculty consisting of best in class experts from academia as well as from the finance industry. The program content is developed in close cooperation with industry and education experts, which guarantees high practical relevance and makes the SFI the most credible and experienced partner when it comes to executive education with a special focus on banking. In addition, the SFI Executive Education offerings provide excellent cross-industry networking opportunities to all participants. : You have global responsibility for education and set-up the UBS Business University. Where do you see the key challenges in the education and development of bank managers and bank experts in the coming years? In the current fast changing environment we see two major developments now accelerated : margin and therefore resource - pressure is increasing, while at the same time customers are becoming more and more knowledgeable and as a result also more demanding. The challenges for the banks education departments are therefore to extract the most important knowledge components specifically for the client relationship staff and to convey these into impactful and efficient learning modules. Plus, in these turbulent times it is moreover important to train the team leaders for change and transformation so that they can lead the way and be a role model for the future. Claudio Loderer, Managing Director Mark your calendars SFI Breakfast Seminar with Giles Keating, Credit Suisse, October 27, 2011 UBS Konferenzgebäude Grünenhof, Zurich 6 th Annual Meeting, November 30, 2011 ConventionPoint, SIX Group, Zurich 2

3 : Well prepared for the future: the new DAS in Banking The Swiss Finance Institute conducted a strategic review of its executive education offering for its core market Switzerland. This review confirmed that the freedom of the Swiss Finance Institute to combine academic thought leadership with practical state-of-the-art implementation, aimed squarely at the needs of the bank managers and bank experts, was a unique value proposition which needed to be retained. in its extensive industry experience. Together the three institutions will initially offer a Diploma of Advanced Studies in Banking, the only bank management program for executives in Switzerland leading to a university diploma. It is planned to expand the DAS in Banking into a Master s program over time. However, the review also concluded that there will be increasing pressure from the market for more formal certification, with brand and a modular offering gaining in importance in a saturated educational market. This will be particularly important for the Institute s Executive Program, which, over the past 20 years, has established itself as the market leader among the management development programs for mid-level managers from banking. As a conclusion, the Swiss Finance Institute decided to look for a partner among the Swiss universities with aligned interests and sufficient flexibility in awarding degrees. A university will bring both the formal recognition and a brand aligned with that of the Swiss Finance Institute. At the same time, the Executive Program was to be split into two certificate programs, and will be augmented over time by a number of certificate programs aimed at individual business areas, such as private banking, corporate banking, and others still to be determined by market demand. Bank managers and experts will then be able to choose and combine those certificate programs best suited to their needs. The Swiss Finance Institute is happy to have found such a partner in the University of Bern. The University of Bern shows considerable flexibility and, in particular, an openness to a best-in-class approach when selecting teachers. This is crucial when combining academic rigor with industry-specific application, as this cannot be done with the limited number of faculty from a single university. The cooperation itself takes place through Rochester- Bern Executive Programs. Rochester-Bern brings in many years of international experience in general management executive education, and it will be responsible to ensure the academic rigor of the program so that the University of Bern can award its degrees. The Swiss Finance Institute will deliver the new program and bring For more senior executives, the offering of the Swiss Finance Institute will continue to follow the current strategy. The Senior Management Program in Banking and the Advanced Executive Program in Banking will remain the open-enrolment programs internationally and nationally, while the Dual Degree Executive MBA in Asset and Wealth Management is an international degree program. : Successful start of Dual Degree Executive MBA in Asset and Wealth Management In May 2011, we successfully started the first cycle of the new specialized Dual Degree Executive MBA in Asset and Wealth Management (AWEMBA). The collaboration between Carnegie Mellon University s Tepper School of Business, HEC Lausanne, the Faculty of Business and Economics at the University of Lausanne and the Swiss Finance Institute has resulted in a truly unique, high-quality program delivered in both the United States and Europe. With 12 different nationalities represented by the 22 participants, and with an average professional experience of 12 years in the financial industry, the first class is a truly international senior group! 3

4 : Research News Welcome to the team The 2010 recruiting season was very successful for SFI and our academic partners. A total of six new professors were hired, of which three have been awarded SFI Senior Chairs. Rounding out this faculty build-up are three young talented professors. SFI has the pleasure to welcome the following professors as part of the SFI Faculty this fall : Pierre Collin-Dufresne joined the Ecole Polytechnique Fédérale de Lausanne as Professor of Finance at the beginning of September with an SFI Senior Chair position. Prof. Collin-Dufresne was previously at the Columbia University Graduate School of Business and has research interests in asset and contingent claim pricing, fixed income securities, default risk, emerging markets, international finance, and real estate economics. Harald Hau started as a Professor of Economics and Finance at the University of Geneva in August with an SFI Senior Chair position. Prof. Hau joined us from INSEAD. His research interests focus on international finance, capital markets, and market microstructure. Antonio Mele began in August with an SFI Senior Chair as a Professor of Finance at the University of Lugano. Prof. Mele was previously at the London School of Economics. His areas of expertise include asset markets and the business cycle, stock market volatility, interest rates and credit markets, information networks in financial markets, and financial econometrics. Anastasia Andrikogiannopoulou has been recruited as an Assistant Professor with SFI support at the University of Geneva. She is a recent graduate of Princeton University. Theodosios Dimopoulos has been recruited as an Assistant Professor with SFI support at the University of Lausanne. Prof. Dimopoulos is a recent graduate of the London Business School. Yuki Sato has been recruited as an Assistant Professor with SFI support at the University of Lausanne. Prof. Sato is a recent graduate of the London School of Economics. : SFI Faculty members receive distinguished prizes SFI Professor Olivier Scaillet was one of the two main speakers of the Distinguished Lecture Series 2011 at the Humboldt University in Berlin. His lecture took place on February 28, 2011 under the theme of Multiple Testing and Factor Modelling in Finance. During this day Prof. Scaillet held Prof. Olivier Scaillet 4 lectures of 1.5 hours each on the following topics : Multiple Testing Procedures, Applications in Finance, Factor Modelling and Applications in Finance. SFI Professor Paul Embrechts received the Award for Excellence in Statistical Research at the International Symposium on Recent Advances in Statistics and Probability, held at the University of Hasselt in Belgium, after the Laudatio by Prof. Dr. Geert Molenberghs. He also obtained Prof. Paul Embrechts from Heriot-Watt University, United Kingdom, the Honorary Degree of Doctor of Science, on June 24, 2011 in recognition of his pioneering contribution to the advancement of Actuarial Mathematics and Quantitative Risk Management. : Graduates recognized for outstanding research work Prof. Alexandre Jeanneret, a 2010 SFI PhD graduate from the University of Lausanne and currently Assistant Professor in Finance at HEC Montréal, won the AFFI - NYSE Euronext 2010 Prize for his thesis «Essays in International Finance and Credit Risk». The Prize seeks to recognize annually an outstanding PhD thesis in market finance defended at a francophone university or institution of higher learning. Dr. Nicolas Mougeot, a graduate of the University of Lausanne and FAME (a predecessor program merged into SFI), is currently Global Head of Equity Derivatives and Quantitative Strategy at Deutsche Bank. Deutsche Bank has been awarded the Risk Magazine Derivatives Research House of the Year Risk Award. The Risk Award is one of the 3 major awards for derivatives research, awarded by Risk Magazine. 4

5 : SFI Knowledge Transfer Seminars At the SFI Knowledge Transfer Seminars, distinguished finance experts from academia and industry discussed opportunities and risks of government and regulatory interventions, of monetary policy and of industry advancements, outlining solutions in research and in the field. Dr. Burkhard P. Varnholt The Future of Wealth Management A highlight was the presentation given by Burkhard P. Varnholt, Head of Asset Management, Products and Sales Division and Chief Investment Officer at Bank Sarasin. In his speech about the future of wealth management, he spoke about the role of Switzerland as a wealth management center and how a new global economic order was benefiting not only fast growing economies, but the Swiss private banking model in particular. According to Varnholt, recent regulatory changes will not hamper but more likely accelerate this growth opportunity. Thus, regulatory reform was presented less as a threat and more as an opportunity. A bigger threat in his view, however, would be a lasting low-yield environment. This could force wealth managers to upgrade their skills at managing risky assets, and to make significant investments into sophisticated asset management information technology. Varnholt s speech was followed by an animated discussion, which had to be interrupted after almost an hour. A shift from inflation targeting to a new paradigm may be necessary The management of liquidity is also crucial to central banks. Dr. Philippe Moutot, Deputy Director General of the European Central Bank, raised the question as to whether or not the financial crisis and the challenges to monetary policy called for a new paradigm to be set up. Before 1914, Dr. Philippe Moutot the anchor was the gold standard. Under Bretton Woods after World War II, the anchor became gold plus the US dollar, to which countries had tied their currencies. In the 1980s, the Exchange Rate Mechanism (ERM I) in combination with monetary aggregates for money supply was introduced to ensure that exchange rate fluctuations did not disrupt economic stability within a single market. Until about mid-2000, policy was based on a combination of floating exchange rates, ERM II and direct inflation targeting. Following the financial crisis, it was possible that G20- Analysis could become a new anchor. The problems, however, centered on heterogeneity, systemic risk and financial development, Moutot said. The ECB did not have models that could encompass all of this. Consequently much would depend on future research. Government intervention is a risky business US government intervention and corporate finance and governance were topics discussed by Professor Ran Duchin of the Stephen M. Ross School of Business at the University of Michigan. In an academic research paper, he and his team reported their evaluation of the effects of the Troubled Asset Relief Program (TARP) on banks that had been provided with capital at favorable terms during the financial and liquidity crisis. The TARP initiative entailed 205 billion dollars being invested in 707 financial institutions. It was the largest government investment program in US history. Their findings were that political connections played a significant role in a bank s access to capital. For weak banks, this effect was even stronger. Under this program, more rescued banks had underperformed than non-recipient banks. Furthermore, TARP recipients had significantly reduced leverage. However, the reduction in leverage was more than offset by an increase in asset risk in loans and security investments. Finally, as a consequence of US indebtedness, Standard and Poor s had lowered the US government debt outlook to negative for the first time since beginning ratings in Thus, he concluded, government intervention was a risky business. : SFI Knowledge Transfer proudly presents it s SFI Knowledge Podcasts on: SFI Lunch Event Panel discussion on «India» Dr. Martin Bardenhewer & Felix Oegerli, ZKB «Liquidity Management is crucial to lower systemic risk of banks» Ulrich Tilgner, Journalist: «The Middle-East: on the move and hope» Please subscribe online at 5

6 : SFI Knowledge Transfer Seminars The Middle East : on the move and hope Limited resources and the competition for strategic raw materials is something Ulrich Tilgner, news correspondent and expert on the Middle East and North Africa, deals with regularly. Ulrich Tilgner Speaking about the rise and aspirations of oil-producing countries such as Iran and Iraq, Tilgner said that the price of oil was correlated not so much with armed conflict in the region, but with the dramatic rise in oil consumption of countries such as the US and China since the late 1990s. In 2010, the US share of world oil consumption stood at 21%, and that of China at 11%; tendency increasing. Yet the oil peak has passed. Accordingly, he expects the price of oil to continue rising. Since oil is crucial for the development of economies, and since more than half of the world s oil reserves is located in the Middle East, Tilgner said, he did not believe that the region would be peaceful soon. Furthermore, economic growth in the West could be at risk. It is the world of finance that funnels growth in India Finance plays an important role in the development of emerging economies. During a panel discussion on the future of India, Naina Lal Kidwai, Head of HSBC India and member of the Board of Directors of Nestlé, said that it was the world of finance that was funneling the growth in India. However, Indian banks were not growing fast enough as more than 70% of the Indian banking sector was run and owned by the government. This was beginning to hamper growth and consolidation. Besides, the regulation in the sector was not attuned to finance at the pace that would be needed. As a result, the growth of Indian companies was outstripping that of the Indian banks. Fortunately, Indian companies were able to borrow money at generous rates Panel on «India», June 2011 : from left Franz Probst, Naina Lal Kidwai, Waseem Hussain, Alastair Guggenbühl-Even, Hansruedi Pfeiffer abroad. This in turn had led to the development of some very vibrant offshore debt markets. Smaller businesses, by contrast, depended on micro finance, which was mostly delivered by the non-banking sector. When asked by Waseem Hussain of MARWAS AG about the interests of Swiss companies in the Indian market, Franz Probst, Chairman of the Swiss-Indian Chamber of Commerce, said that it was the IT industry that had jump-started India s development as it exists today. Moreover, it was the huge Indian market with 1.2 billion people that attracted foreign manufacturers and these days also life sciences to India. Nonetheless, India was a difficult place to invest in, according to Alastair Guggenbühl-Even, CEO and Chairman of the BTS/Monterosa Group. However, India had the potential to grow at a rapid pace economically, Hansruedi Pfeiffer, Regional Advisor at the Swiss Agency for Development and Cooperation said. This was dependent on the poor being able to participate in this development. Sustainability is amongst others a key factor in global competition Economic success depends on environmental and social progress. This view was expressed by Barbara Kux, Chief Sustainability Officer, Head of Supply Chain Management and Member of the Executive Board at Siemens AG. The world after the financial crisis was no longer the same; and the biggest challenge was to find a way into a more sustainable world, she said. The crisis in the financial markets, in North Africa and around public debt was symptomatic of a sustainability crisis. Therefore, volatility Barbara Kux and change would be constant threats in future. Because economic power was shifting more towards the emerging economies, the recovery of the markets was asymmetric. Kux sees great opportunities, however, in a «green movement», in which states and companies compete for advantages in the generation of clean power and a healthy environment. According to Kux, sustainability is no longer an ethical issue. In fact it is also a key pillar of the Siemens company strategy and a key factor in global competition. IMPRESSUM A publication of the Swiss Finance Institute. The Swiss Finance Institute Newsletter is published twice a year with contributions from Institute staff and faculty as well as external experts. To subcribe : Swiss Finance Institute Walchestrasse 9 CH-8006 Zurich [email protected] 6