have 20 years of problems in the financial industry, you cannot tidy that up in 20 months. But it’s a process.
But we’re very clearly committed to changing the bank. We have nothing to hide. We have a very clear agenda of every issue needs to be dealt with and put behind us.
And I think only that determination, cleaning up issues, can actually provide a good future for the banks.
Take the — you know, one example that I always take was the pharmaceutical industry. If you go back 20 years, the pharmaceutical industry didn’t have a very good reputation. They suffered the same public perception and image problems that the banks now have.
They made it back in public perception because they suddenly came back with the people because they invented products that helped people age in grace, that helped people deal with issues about, uh, you know, health care and other issues that…
BARTIROMO: Longevity.
WEBER: — longevity, uh, that make people’s lives better.
I don’t think if you ask — longevity, uh, that make people’s lives better.
I don’t think if you ask — you know, and a lot of people go to the pharma store every day. And when they come back, they will tell you, using these drugs makes my life better.
I don’t think you have a lot of people that go to a bank and saying, having been at the bank makes my life better at the moment.
So — but that’s where we need to go.
BARTIROMO: Yes.
WEBER: We need to really come back with people and people understanding that banks can help them have a better life. Banks can help them deal with complicated financial issues to the advantage of the customer and not to the advantage of the bank.
So banks need to change and come back in public perception with the clients. It’s something that is frequently forgotten, but, you know, other industries had these issues, as well. We just need the time to work it out, because it doesn’t ever happen instantaneously. But I think ultimately, banks need to prove that they got an existence with the people because they help people deal with issues that other institutions cannot deal with better.
BARTIROMO: Yes.
WEBER: And that’s — that’s where we need to go.
BARTIROMO: And — and this takes time.
WEBER: It takes time.
BARTIROMO: It just doesn’t happen overnight. I — I (INAUDIBLE)…
WEBER: It takes time and determination. So, you know, you really have to understand that the world needs to change, because people want banks to change. And we’ve got to hear that message. And we’ve got to internally give that message loud and clear, yes, we do need to transform ourself because we’re not perceived as being, you know, where we should be.
BARTIROMO: Yes.
Let me ask you about your discussions in the next couple of days about the Ukraine situation, uh, and the IMF, uh, package. The latest on — on Ukraine aid, finance minsters are pressing the U.S. to allow an increase in the financial resources of — of the IMF as they are — they’re saying that Ukraine needs help.
Um, $18 billion in aid, is that what it should be?
Where are you on this?
WEBER: Well, I think the Ukraine clearly needs help, uh, international financial help. And I think the IMF probably is best placed to really estimate what the amount should be for at least the core project to go ahead.
They need to fund in the market. They need to build infrastructure. So I’m — I’m where the IMF is. Uh, they need international help.
The international community needs to exercise solidarity now with the region in order to help them pull through and move closer to Europe, because, remember, they’ve just had one part of the region cut off from Europe, and, therefore, the rest of the region needs to be re-ensured that their Western orientation is actually supported by the West and we see them as a welcome addition to the countries that are making up Europe and are making up the western part of Europe.
BARTIROMO: But what are the implications, Axel?
I mean we see the U.S. pressing for, you know, threatening to impose even deeper sanctions on Russia, the G20 focused on the economic fallout of the crisis, Europe getting 30 percent of its gas from Russia.
Does Europe get hurt if we see further sanctions on Russia?
WEBER: I think both are two different topics. So one thing, yes, clearly, Ukraine needs help, and that should be done. The other one is how you deal with Russia and how you deal with that.
I think what we’re seeing there is that — a different set of attitude — (INAUDIBLE) attitudes depending on how close people are in the proximity of Russia. Yes, to some degree, Europe is dependent on energy resources, including from Russia. But I think over medium-term, we can divert that. We can basically make up for that.
German industry is particularly exposed, uh, to basically having good connections with Russia and, therefore, the German government will look at a balanced approach in order to, yes, at the same time, send the right message, but to do it in a way that does not undermine the economic relationships.
So I think we will see a more balanced approach in Europe, uh, in — in terms of how we deal with the Russian issue. But I think one thing is very clear, forget the financial sanctions, the message that needs to be sent has to be a very clear one, whether that’s backed up by sanction action is a different issue.
But once you’re clear on the message, then you can deliberate how balanced you can be on the regime in which you reinforce that message.
But the message needs to be sent out first. And that’s where I think I — I still see some need for action. The message is not yet — not yet been delivered very clearly. And then once you have a clear message out there, you need to think about how you support that.
BARTIROMO: I think that’s a really important point, particularly given you’ve got different players who may not want to deliver that message, OK.
So I mean, are we going to be able to have these economic sanctions stick when you’ve got companies, all — global companies doing business in Russia?
I mean UBS is a Swiss company.
Are you going to be not doing business in Russia?
I mean the — this is not what the sanction is, but…
WEBER: Sure.
BARTIROMO: — how are we going to ensure that these sanctions actually stick and that that message is being communicated?
WEBER: Well, we’re not a big player in, uh, we don’t have a lot of business in Russia, but clearly, if there is a sanction regime, uh, that sanction regime needs to be enforced by everyone. Uh, and as far as Switzerland is concerned, I can’t speak for the country, but in the past, whenever there were European sanction regimes in place, Switzerland joined forces and basically embarked on the same, uh, on the — on the same set of sanctions.
So my expectation is that Europe, in its totality, needs to agree to a regime. And we have — see different discussions over there.
And then the second thing is whether Europe would want to go quite as far as the United States wants to go or whether they could find a mu — a common ground. That’s another debate.
Again, I see some more need for discussion there.
But ultimately, I expect that once the message is clear, there will be a joint set of sanctions, because it makes no sense to have differential sanctions and then you can talk, uh, about sanction (INAUDIBLE) in a totally different way.
I think it needs to be a clear, common ground and then that should be embarked.
BARTIROMO: All right, let me — let me conclude here on Asia. Japan, China and, of course, the emerging markets, as well, I want to talk about.
Um, in Japan, a bit of a debate going on about Abenomics, about the approach to getting that economy stabilized.
What’s your take on what’s going on so far?
Larry Riska (ph) — Larry Summers, the other day, on this program, said it was the biggest underestimated risk for the global economy.
WEBER: Well, there are a lot of risks out there and I would like to maybe make a slightly different point to what Larry said.
If you look back in 2012, there was just one big risk in the global economy and it was the risk that a lot of people felt there was a breakup risk, a tail risk in Europe.
I always felt it was exaggerated at the time, because I knew that Europe was very determined not to let that happen.
BARTIROMO: You said that.
WEBER: And it hasn’t happened. And where we’re now is that one single big risk has been replaced by a number of risks. And markets usually feel much better if there is a number of risks out there rather than just one big one.
And the problem is that some of these risks are so correlated that if you have one bad risk materialize, then they all could become correlated and actually turn out to be as big a risk as a single tail risk has been.
So what are these correlated risks?
There is a risk of a hard landing in China. I don’t think it’s a big risk, but it’s definitely a risk that needs attention.
There is the risk that despite fiscal and monetary stimulus, the long-term pick-up in the Japanese economy will not be what it should be and, therefore, this will not lead to the expected pick-up in growth and a lot of the short-term effect will simply be on — on the exchange rate, so it will be a short-term stimulus but no long-term growth program.
Again, that would pull back growth globally and it would be a negative for global growth, as would be a hard landing in China.
There’s the risk that a lot of people in the market underestimate what is the risk in Europe. Now, the market always overreacts. So when — when — when Greece happened, the market was kind of pricing in very bad things. Now that the things are improving, the market is pricing in very great things, you know.
BARTIROMO: Right.
WEBER: Spain can fund at a lower rate than the United States. Clearly, any fundamental analysis comparing the U.S. economy and the Spanish economy would not lead you to such a conclusion.
So if it can’t be true, it probably isn’t true. And the market is exaggerating and, therefore, there will be some re-pricing of the problems in Europe over the years. And there are many areas where this could be ignited by.
Uh, there is the whole issue about the European elections. You will have anti-European or non- not pro-European forces in the European Parliament, which is something we’ve never seen. And they’d be a major force.
You will have a European bank stress test, an asset quality review, that might shine the torch again on the weakness of some of the European banks.
So there are a number of issues out there, risks, that could suddenly change the mood in the market and then lead to Europe being, again, one of the risks.
It won’t be a tail risk, but it clearly will add to the perception that there are a number of problems that will take a toll on global growth and, therefore, since we’re all in this boat together, might bring the economy into a much less favorable situation than it is now.
BARTIROMO: Interesting to note
