Excessive wages are harmful to the reputation of bank managers and for the country, says Christian Rahn, partner at Rahn+Bodmer, in an interview with finews.com.

Christian Rahn, wages paid to bankers are angering the people. What do you think about the compensation packages worth millions of francs paid to executives such as Sergio Ermotti?

I won’t speak about the salaries of individuals. But they ought to reflect the long-term and sustainable performance as well as the risk carried personally by the manager. In recent times however, the development of the compensation in relation to the risk has been completely wrong. But to define the correct level of compensation from a moral perspective is very difficult.

If the compensation of a manager reaches a level that citizens cannot comprehend, there’s a political and social damage. There has already been damage in the past. The results of referenda afflict damage on the economy and therefore on Switzerland.

Isn’t the industry as such affected?

Absolutely. The banking industry hasn’t the best of reputations in Switzerland. But the political damage is more tragic.

How much do you earn?

More, if the bank does well, less, if it doesn’t – just like in other companies.

«We can pay out all current account balances at all times»

Most of the profit stays with the bank though, to stock up equity and to secure the future of the next bank generation. And that’s why it is difficult to say how much a partner earns.

If you deduct the amount that goes into the bank’s equity, how much do you retain?

A fraction of the amounts paid to the top managers of larger Swiss banks.

You aren’t going to give me a figure.

No.

As a private bank, Rahn+Bodmer is more affected than other banks by the negative rates applied by the central bank. How strongly are you affected?

More than the lenders of course, because our equity is being used to a very small degree for the financing of loans. The remaining part of our equity as well as the assets kept on customer accounts are liquid.

It is crucial for us never to become illiquid. At all times, we are able to pay out all current account balances of our clients with immediate effect.

In other words, you keep a lot of money at the Swiss National Bank (SNB)?

Yes, several hundred million francs. But we’ve invested in liquid and secure government and corporate bonds at an early stage to reduce our negative interest payments. Of course we have to accept a small negative yield with some bonds, but they are much lower than the 0.75 percent charged by the SNB.

How much did you have to pay to the SNB last year?

So far, we have avoided paying direct negative rates to the SNB thanks to a quick reaction after the introduction of the negative rates regime by the central bank and a skillful treasury. But as the investments also have negative yields, there’s a small single-digit loss affecting our balance sheet.

Do you demand interest from your clients?

As we ourselves don’t pay any interest to the SNB, we can’t pass it on. We will have to reconsider this should the situation get worse.

The Swiss banking industry is in consolidation. Something that you would consider taking part in at Rahn+Bodmer?

We won’t buy another bank but expand organically. The culture of our company is very important to us and this is a factor often underestimated in acquisitions. It is possible that the culture of another bank would fit with ours, but we are happy with the size of our company today.

How much have you expanded in recent years?

We are growing slowly but steadily. In the past years, we completed a concentration of our target countries and had to make a revision as a consequence – much like other banks have done too. This process has now been concluded to a large extent.

«Using first names doesn't affect the quality of work»

In the past five years, we have been largely flat in terms of client assets. We increased assets under management to 11 billion francs from 10 billion within the past two years, thanks to the financial market.

You have mentioned how important the corporate culture of your company is. What does it make stand out?

We have an open doors policy. Employees can make suggestions and offer constructive criticism at any time and irrespective of their rank. We are also on first-name term, which we introduced in several steps.

Are you on first-name terms with apprentices?

Of course, when I meet them for the first time, I tell them «Hi, I’m Christian».

Using first names is sign of the times and doesn’t affect the quality of work. There’s something wrong if respect depends on which name you use. We have had no negative experiences whatsoever, quite to the contrary. The use of first names has fostered a sense of community spirit and made us a mutually supportive.

The use of first names however is still pretty unusual for a bank such as Rahn+Bodmer with its tradition.

When I present our bank to new employees or potential clients, I start with the history spanning back almost 270 years. At the same time, I tell them that history can’t be a business strategy.

«We aren't much affected by the U.S. tax dispute»

History may structure our sense of tradition, but you shouldn’t get hung up on it. You must keep up with the times.

Rahn+Bodmer is a so-called category 1 bank in the tax dispute with the U.S. What’s the latest and how is the dispute affecting the bank?

We remain in contact with U.S. authorities and are cooperating, but we have no influence on their timeline. As an organization, we aren’t much affected by the U.S. tax dispute, because all data that could potentially be asked for has been prepared for. Our clients hardly touch upon the subject anymore. Which goes to show, that our customers have trust in us.


Christian Rahn, born in 1956, studied law at University of Zurich starting in 1975. He went on to complete an LLM program at University of Chicago. Together with his brother Peter, Christian Rahn assumed his father’s stake in Rahn & Bodmer in 1990. Since then, he is a partner at the bank. He chaired the Association of Swiss Private Banks from 1996 through 1999. He loves hiking, in summer and in winter time.