Tuesday, February 21, 2023

Patrick Odier: ‘Switzerland cannot hide behind neutrality’

There will always be questions about who owns the money, so the role of finance is difficult to associate with wonderful, romantic qualities

Patrick Odier: ‘Switzerland cannot hide behind neutrality’ 
The banking scion on the art of counselling the very, very rich, taking risks on clients— and why Switzerland should move away from moral isolationism

Patrick Odier, scion of one of Switzerland’s most illustrious banking dynasties, has brought me a chocolate cauldron. A lot has changed in Swiss banking during Odier’s 40-year career at his family firm — including, in the past decade or so, a tumultuous if qualified end to its most celebrated quality, unyielding secrecy — but this gift is not, it turns out, a metaphor for the integrity of Swiss finance. 
It is a wintry Friday in Geneva and the snow is falling hard. At the weekend the city will celebrate the Fête de l’Escalade, commemorating a victory over the Catholic duchy of Savoy in 1602. The heroine of the show is an old lady and her stock pot — the defenestration of which, in legend, alerted the city watch to a devious night-time attempt by Charles Emmanuel I’s troops to storm the walls. The Genevois gift dinky chocolate cauldrons every second Sunday of advent in remembrance.

“It happened just over there,” Odier tells me shortly after we meet, recounting a miniature history lesson on his home city — a masterclass in introductory charm — as he points across a slush-covered street towards the university. 
We’re meeting for lunch at Le Philanthrope — a modern French restaurant, which, I teasingly suggest to Odier, he has chosen for its name as a not-so-subtle piece of public relations work. 
He protests: one of his daughters works as a lawyer across the road, he says, and this is their lunch spot. And besides, the crowd is very agréable: there are, noticeably — Odier points this out himself — very few banker-types in here. Filament bulbs dangling, fashionably, from looping cords and a wallpapered feature wall give it a slightly over-designed air, but the place is packed. 
Odier, 67, is slight and spry, wearing a dark grey suit, a white shirt and a light blue gilet. “I’ve always had to ensure that my words corresponded to my duty . . . but now if I can express myself a little more openly, I will do,” he says, smiling, deftly wielding the conditional caveat. Switzerland does not have an aristocracy but, if it did, Odier would be towards the top of it. Banking is a national institution and Lombard Odier — founded in 1796, ultra-careful, ultra-discreet, owned and controlled by just six partners — probably comes close to embodying its ideal. 
But Odier is also something of a radical in his industry. When Swiss banks’ secrecy was finally challenged internationally, Odier says he pushed his peers, as head of the country’s powerful banking lobby, to accept change. More recently, he has been one of the financial sector’s most vocal figures on climate change and finance. He is a major patron of the arts and of medical philanthropy. 
And through his wife, the Greek-Egyptian former ballet dancer Cynthia Odier, he is plotting a retirement working on cultural projects in Athens. Not to mention his interest in politics and international diplomacy. All of which does not distract from the fact that for most of his career, Odier has been first and foremost a discreet and loyal counsellor to the world’s very, very rich.

The backbone of Switzerland’s fantastic banking wealth — and its, for some, questionable international reputation — is private banking. Of all the money that the world’s wealthy stash beyond the borders of their home countries, one quarter is kept in this mountain country, population almost 9mn. Lombard Odier holds about $335bn of their assets — as well as mandates from a handful of large institutional clients.
 There are many reasons why the rich put their money here and, for the greater part, they are legitimate. But Swiss banks tread a fine line. Lombard Odier has about $800mn of frozen assets in its vault connected to the corrupt Uzbek oligarch (and former Swiss socialite) Gulnara Karimova — who, following a shift in Uzbek politics, is now in a Tashkent jail.

There will always be questions about who owns the money, so the role of finance is difficult to associate with wonderful, romantic qualities

When you cater to the people that own the world’s riches, then you are on the front line of geopolitics. Lombard Odier’s co-founder Henri Hentsch knew so too, as banker to Napoleon Bonaparte, who used the bank’s offices as his own when he passed through Geneva en route to pillage Italy. 
The front line can be a profitable place to be. “Each global crisis, whether it was a macroeconomic crisis, a banking crisis, a military crisis or a health crisis, has led to [Swiss banks] increasing their market share,” says Odier. Indeed, the world’s rich have never been richer. 
Thanks to quantitative easing, and the surge in global asset prices it has effected, the wealthiest 1 per cent, according to the most recent global wealth report by Credit Suisse, own about 50 per cent of the money in the world. (By a neat trick of symmetry, the poorest 50 per cent own about 1 per cent.) A waiter sets down amuse-gueules: a delicate, gently warmed cauliflower panna cotta in a small clay cup, with an aromatic mustard foam and a few grains of puffed rice for some textural contrast.

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We seem to have landed on the issue of Swiss banking’s dubious morality. I take a sip of the crisp local Aligoté wine Odier has selected and, as nonchalantly as I can, ask why he thinks the reputation of his profession and country is still, for so many in the western world, so deeply tarnished. Banking is not an easy profession to moralise about in the first place, he notes, especially when you are talking about looking after the wealth of the rich. “There will always be questions about who owns the money, who doesn’t own the money, who owns it legitimately and who doesn’t own it legitimately and so on . . . so the role of finance is difficult to associate with wonderful, romantic qualities.” But Switzerland’s poor standing as a centre of dirty money is, he says, outdated, and he hopes it will fade. “In the last 10 to 15 years we have seen the system change quite radically,” he says. Total banking secrecy ended in Switzerland with a series of measures following the 2008 financial crisis, culminating in the Swiss government’s signing of the US Foreign Account Tax Compliance Act in 2013. Swiss banks are now legally obliged to share limited information with foreign regulators on accounts held by their citizens. “I am not naive — there are many things that could be improved in our financial centre, but I think we managed the transition pretty solidly,” says Odier, who headed the powerful Swiss Bankers Association at the time.

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Le Philanthrope Bd des Philosophes 
12, 1205 Geneva, Switzerland 

Amuse-gueules (complimentary) 
Mesclun salad with trout SFr25 
Foie gras, brioche, cèpes and truffle jus SFr28 
Basque pork with pommes mousseline SFr38 
Cod with potatoes and truffle-glazed vegetables SFr40 
Valser sparkling water x1 bottle SFr6 
Actéon Aligoté 2018, Domaine du Centaure x2 glasses SFr16 
Pont des Soupirs 2016, Domaine du Paradus x1 glass SFr11 
Pinot Noir 2017, Domaine de la Devinière x1 glass SFr9 
Sorbets x2 SFr8 Espressos x2 SFr8 
Total SFr189 (£168.73)

“It took some determination and courage to recognise that it had become a problem — and that it had lasted long enough. We spent some time defending our approach . . . but then we went about the transformation very, very fast. By 2018 everything had changed.” (Lombard Odier paid $100mn in 2015 to finally settle any outstanding questions with US authorities over its clients’ tax affairs.) 
For Odier, the success of Switzerland in the years since “the duty of absolute silence” (as the law once defined it) ended proves that secrecy, at least for the avoidance of tax, was never the sole selling-point of his country. “We have centuries of experience as bankers here,” he says, adding that customers value this. “No bank went bust or disappeared when we ended secrecy.” Our starters arrive. 
Odier has opted for a mesclun salad with delicate blush-pink strips of smoked trout from the lake, while I have sautéed foie gras, perched on a grilled piece of brioche. It is at this point that I remember reading that Odier used to fence as a boy. I did too — badly. And what I am now ever so slightly conscious of is recalling, as I skewer a glistening piece of liver, the slow frustration of facing a skilled opponent. 
So perhaps time for a redoublement. There is a paradox about Switzerland’s success, I suggest to Odier: all the things that make it attractive for the world’s wealthy — its political stability, independence, rule of law and discretion — are things that appeal most to those who lack them in their own countries. And quite often, those people are crooks, authoritarians, or both.
 “Look, no bank has any interest in lending more just because it can, and no bank has any interest in taking a reputational risk because it can,” Odier says. “Ultimately, the lesson is never to accept anything from someone if you are not completely convinced that the answer about where it comes from is the correct one.”  I point out that this was not always the case at his own bank, and he sighs wearily, noticeably pained by the two examples I give: the aforementioned Gulnara Karimova accounts and in 2005, tens of millions of dollars embezzled by Yasser Arafat. (The Palestinian leader even used to boast of his hidden wealth at the bank.)  “You do not like to have your name associated with something disagreeable, though I think history will still tell in both incidents what really happened,” Odier says, reticent to explain what he means.
 “I was even personally mentioned in a press article saying I was the banker [to Arafat] — completely untrue! I was simply the boss of the firm,” he adds, a touch indignantly. As we finish our starters, I take a glass of a light local Pinot Noir to accompany my main, while Odier has gone for something slightly richer; a Left Bank claret-style blend, lightened with a Swiss grape variety, Gamaret. 
“The reputational risk was something that we felt completely sheltered from, thanks to an internal decision-making process that we had followed to the letter but ultimately was insufficient,” he says. The lesson, he adds, was that box-ticking is never enough. “You can be convinced by the wrong people [with false evidence], or you can simply accept on the 10th time the same dubious answer because you don’t want to hear it an 11th time.” Swirling my wine around my glass, I ask if this judgment, for him or his bankers, is ever a moral one? “A moral condition would make it extremely difficult,” he says. “It has to be about legal and judicial criteria.”
 I think perhaps, I have some sympathy with this: no bank should simply turn down a client, rich or not, because they, their politics, or their line of business, are subjectively obnoxious. On the other hand, legal and judicial criteria have proved, so far, flimsy bulwarks. 
Here, I suppose, is the crux of the matter. For Odier, it is a mistake to expect banks themselves to be social and political arbiters. “I had to fight a lot against our government [in Switzerland] against some measures, where they basically would have put bankers in the position of being a policeman looking at clients with eyes that were basically saying ‘prove to me you are honest’. 
That sort of approach is naive,” he says. From time to time you have to face up to your risks . . . the important thing is to recognise if you took them willingly or not The mains arrive: grilled cod with crushed potatoes and truffle-glazed vegetables for Odier, and a Basque pork fillet for me, with a rich, glossy sauce and little swirls of pommes mousseline. So, I ask, a little puckishly now the wine is kicking in, if we meet again for lunch in 10 years’ time, I won’t have read anything bad about Lombard Odier in the headlines? 
“Part of the general risk of this profession,” he shrugs, with a bit of a smile, “is that from time to time you have to face up to your risks . . . the important thing is to recognise if you took them willingly or not.” Odier, is not, however, an advocate for Swiss moral isolationism, and as our plates are taken away, I ask him about “neutral” Switzerland’s decision to match EU sanctions on Russia. 
“I’m happy that we did it . . . we have had a dramatic evolution of the geopolitical situation and a breach of international laws and conventions . . . Switzerland simply cannot hide itself behind an abstract concept of neutrality that refuses to view reality as it is.”  
It is, nevertheless, a stance that is causing problems for his industry, he adds: big clients around the world are wondering just how accessible their money in “neutral” Switzerland might be, if their governments too break with the western order. In truth, the past few years of Odier’s career have not been at all dominated by questions about banking secrecy or dirty money but, rather, climate change. These days, the question of “sustainable investing” has become almost passé. It is hard to parse what is genuine from what is Davos-speak among many financiers. Odier is franker and more nuanced in his discussion. 
He speaks eloquently and at length about his work on the subject, and his plans now he has stepped down from the bank, to focus on international advocacy and better connecting financiers with climate change policymakers, in particular through his work as president of the UN-backed Building Bridges initiative. But his big concern, he tells me, is shifting towards the looming social crises that decarbonisation is creating. “You can’t just tell a province in Canada that they should stop producing fossil oil — you’re not going to move that whole community over to the other side of the country where there are jobs,” he says. 
“We have to talk urgently about what we can do to mitigate the effects on vulnerable economic and social groups in our own societies from all of this — just like we do about the global south. Our social fabric depends on it — it is going to be the major issue facing us in the coming years.” 
The issue is all the worse, Odier continues, warming to his theme, because the period since 2008 has been an unprecedented one of “asymmetric capitalism”, in which the rewards of efforts to stave off financial disaster and keep economies afloat have almost exclusively fallen to the asset-owning rich. Add to this rapidly falling living standards — “when you live in a world of zero interest rates, everything will become expensive in the end” — and the next few years, he says, “will be incredibly challenging”. Espressos arrive. 
Our discussion turns to Greece, and we discover a shared love of the Mani, the wild, barren peninsula in the southern part of the Peloponnese. We swap recollections and I delightedly recommend the writing of Patrick Leigh Fermor, a personal hero Odier has not heard of. 
He scribbles his name down on the back of a business card. With his wife, he tells me, he is also funding the creation of a cultural hub in Athens to house the Swiss school of archaeology, Swiss embassy and an arts centre. 
He also vividly and fondly recalls a few days he spent living in an almost bare cell on Mount Athos — one of the holiest sites in Greek orthodoxy. “I suppose I might be considered a bit of a strange banker,” he says. 
And what, I ask, as we pick up our coats, would you have been if you weren’t one? He laughs. “A vet!” Sam Jones is the FT’s Austria and Switzerland correspondent 
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