The LUMS graduate with a mission to keep the banks on track
03 March 2015
03 March 2015
LUMS graduate Mark Branson is head of the Swiss financial regulatory body FINMA. In this feature he reflects on banking regulation, and on his time at Lancaster.
As Branson was addressing a group of management students on a visit to Lancaster in early February, he already knew that a media storm was about to break concerning HSBC Switzerland’s alleged tax dodging advice – he also knew sound preparations were in place to deal with it.
This high-flying Lancaster alumnus, who gained his Masters in Operational Research in 1990, was able to enjoy his talks with academic staff as well as question and answer sessions with students because he was on the front foot about the inevitable media frenzy. All he and his team in Bern had to do was to face it.
“We knew about the expected media coverage in advance,” says Branson. ”We had been busy explaining our record in investigating and sanctioning the bank over recent years, which is a good one.”
This practical approach is the trademark of a man whose unusual and versatile career started in operational research, and evolved through banking into his current role in financial regulation as CEO of the Swiss Financial Market Supervisory Authority (FINMA) - the only non-Swiss person ever to have held this position.
It has been a high-pressure road to his current position, requiring navigation through the turmoil of the 2008 financial crash, and seeing him taking senior positions in both Switzerland’s main banks - Credit Suisse and UBS. It also encompassed two years as CEO of UBS Securities Japan Ltd in 2006-7, later found to have been a time when the bank became involved in rigging the London Interbank Offered Rate (Libor).
This led in 2012 to calls from Switzerland’s Green and Socialist parties for Branson’s resignation as head of banking supervision for FINMA, but five investigations found no indication that Branson knew of or was involved in any wrongdoing relating to Libor. Instead he was promoted to CEO in 2014.
Stressful though the scrutiny was, Branson views the process with equanimity: “When you take high-level public-sector jobs you are very exposed. You are never going to make everyone happy. I find criticism per se, and questioning one’s suitability for a public role, perfectly acceptable. The fact is that I worked for 12.5 years for a firm, UBS, which has had multiple risk and conduct problems. It’s natural that there were questions.”
The need for practical common sense was hammered home to him at Lancaster and it stuck. After the highly theoretical approach to Mathematics and Management Studies he had encountered as an undergraduate at Trinity College Cambridge, he found himself ‘up North’ trying to solve real-life problems through mathematical and quantitative models. He also quickly discovered their limits.
He laughs as he remembers an MSc project relating to the delivery of brass valves from a factory in Ormskirk in Lancashire. Only when he visited the warehouses did he realise that his model had not taken account of the fact that some roads were too narrow for the heavy goods vehicles involved in his model.
Having left Lancaster fired with an enthusiasm for modelling business problems, he made a first career move into consultancy at Coopers and Lybrand, with assignments including simulating Mars production lines and predicting prices in the Norwegian hydroelectric industry.
Rising through the ranks drove Branson further away from practical problem solving and towards project management and selling, so in 1993 he decided to take a new direction into banking and finance at Credit Suisse in London, later leading the customer support department. In 1997 he joined SBC Warburg (now part of UBS) and was transferred to the Zurich office, eventually being promoted to Head of Communications in 2001 - a post he held for five years.
He looks back with some bemusement at the feverish activity he observed preceding the 2008 crash - when it was possible for a young trader to make enough money in two to three years to be able to retire. One of the most important lessons he had learned at Lancaster was not to depend too heavily on theoretical models. “The models encouraged the banks to take more risk than they should have done. The models being used were based on the past, but they were no guide to the future. There were warning signs, but no one was ready for what happened.”
Branson had wanted to be where the action was, but like many of his colleagues was impatient with the pace of change in the aftermath of the financial crisis, so he decided to make a career step change into the public sector in Switzerland, where he has been based since 2000 (other than his two years in Japan).
Now as CEO of FINMA he relishes the variety of his day-to-day work putting in place a more robust regulatory framework to correct some of the omissions of the past. Regulation is rightly tighter and banks less highly leveraged, but he believes more work is needed for the banking world to get its house in order.
“The sector must clean itself up. If there’s no trust in banks and bankers the banking system will continue to erode, and regulation and enforcement will become ever more intrusive,” says Branson.
His time at Lancaster provided the practical foundation for his career. He remembers his year with affection, in particular the sociability of the close-knit group of students to which he belonged.
Asked about his advice to current Lancaster management students Branson doesn’t hesitate: “Students should not be slaves to the model, but learn to trust common sense and employ the rule of thumb.”
The sector must clean itself up. If there’s no trust in banks and bankers the banking system will continue to erode, and regulation and enforcement will become ever more intrusive.