Official Report Into Failed E-Bank Marks Fresh Start For Switzerland's Vontobel

by Ulrika Lomas, Tax-news.com, Brussels

10 May 2001

We reported in February that Vontobel Holding AG, the Swiss private banking and asset management group, had pulled the plug on its Internet banking project, "y-o-u Bank", which had been in the pipeline since March 2000, citing costs and timing. Then there was more bad news in March when, Vontobel, which was the first Swiss private bank to announce that it was setting up an independent e-banking businesss, said the scrapping of the bank would have a serious effect on its operating results and, moreover, announced a "change in management" amongst its top executives. An inquiry initiated as a result of the y-o-u bank fiasco has just been completed, with the bank saying that its earlier actions have been completely vindicated.

The failure of the y-o-u bank project was directly related to irregularities involving the Corporate Finance department of Bank Vontobel, hence the swift departure on March 14 of Joerg Fischer, the Delegate of the Board of Directors and Chief Executive Officer of Vontobel Group, Walter Kaeser, the Chief Financial Officer, and Hans-Peter Bachmann, head of the Corporate Finance Department, all of whom were "summarily relieved of their duties", according to the bank.

The "official" inquiry into the shenanigans at Vontobel was conducted by Ernst & Young, Vontobel's auditors, who listed a number of serious failings in their report. The Head of Corporate Finance, in particular, is hauled over the coals, and the chief financial officer did not fulfill his responsibilities correctly either. These failings, according to Ernst & Young, were accompanied by 'the inadequate execution of top-level managerial, supervisory and control duties on the part of the Chiarman of the Board of Directors of Bank Vontobel AG and concurrently by the Delegate of the Board of Directors of Vontobel Holding AG.'

In a nutshell, the whole affair centres upon abuse of power, which Chairman of the Board of Directors, Hans-Dieter Vontobel, readily acknowledged in a speech to shareholders this week. He admitted: 'In those few months, much - too much - got out of hand. It would be too easy to blame what happened on the existence of structures which allowed or even encouraged the abuse of power - and thus trust. Ultimately, however, abuse is rooted in the actions of individuals.We have responded by systematically correcting both the inadequate structures as well as executive appointments, thereby eliminating the causes.'

With the official inquiry now over, Vontobel hopes to draw a line firmly under the whole sorry affair and move on. The group said it would continue to pursue its activities in the four business areas of private banking, investment banking, institutional asset management and investment funds.

Hans-Dieter Vontobel said: 'We can therefore return to our traditional strengths and look ahead with confidence. And - figuratively speaking - we shall roll up our sleeves and fix the damage done, trusting in a company with the courage to undergo a painful correction, which is no mean feat. Trusting in a company which did not lose its composure or sustain substantive damage in the face of the shortcomings of three of its leading figures. Trusting in a company which is now a little leaner than it already was, but....also fitter and healthier......Finally, trusting in a company whose clients have stayed loyal. To me... that loyalty has been an uplifting experience which gives me faith in our ability to overcome this nasty episode successfully and rapidly.'

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