Inside European finance’s most secretive society
‘This is not like Davos, where anyone can buy their way in. This really is exclusive’
In late October more than 40 of Europe’s most powerful bankers convened at the palatial Dolder Grand hotel overlooking Zurich for three days of discussions about the state of their industry.
Attendees were given the chance to quiz Switzerland’s finance minister Karin Keller-Sutter and central bank governor Thomas Jordan, just over six months after the pair played key roles in the rescue of Credit Suisse by its rival UBS.
The talks, which were not publicly disclosed, were arranged by a highly influential organisation whose existence is barely known outside its rarefied membership.
The Institut International d’Etudes Bancaires is the most exclusive and secretive networking club in European finance, where bank bosses rub shoulders with guests from presidents and prime ministers to royalty and central bankers.
“This is not like Davos, where anyone can buy their way in,” one longtime member told the Financial Times. “This really is exclusive.”
While the IIEB was set up to foster closer ties between banks at a time of geopolitical tension and challenges to financial stability across Europe, its secretive, lavish get-togethers risk looking out of step with modern expectations for transparency.
“We were members for decades when the organisation served a purpose to bring European banks closer together,” Pär Boman, chair of Swedish bank Handelsbanken, told the FT. “But after the financial crisis we felt its extravagance and lack of transparency did not fit our values.”
For 73 years the IIEB has brought together the heads of Europe’s biggest banks twice a year at luxury hotels and royal palaces across the continent to discuss sensitive subjects such as M&A deals and global policymaking.
The group has no website and its membership, meeting agendas and minutes are not made public. Members are discouraged from sharing details of the discussions, several told the FT under the condition of anonymity.
As well as being a forum for exchanging ideas between Europe’s most connected financiers, the IIEB is an elite social club where, over three days, the bankers’ partners enjoy gala dinners, private tours of historic landmarks and high-end shopping trips.
As Europe’s lenders come under pressure to improve their lacklustre valuations — having fallen far behind their US rivals on profitability in recent years — and with the continent bracing for a long-heralded wave of cross-border dealmaking, the IIEB is entering one of its most important periods since it was set up in the aftermath of the second world war.
The IIEB was founded in Paris in 1950 by the heads of four lenders from across the continent — Crédit Industriel et Commercial, Union Bank of Switzerland, Société Générale de Belgique and Amsterdamsche Bank — with the aim of holding regular top-level discussions on developments in the banking sector, as well as the economy and monetary system.
It was part of a raft of cross-border institutions set up during that period to encourage closer ties between organisations from countries that had recently been at war with one another.
The IIEB’s initial aim was to improve international capital movements and combat currency controls in the face of greater interference from national governments in the financial system.
The heads of 30 European banks came together at its first meeting in Paris in April 1951. British banks did not attend as the Bank of England had initially blocked their membership.
Ilaria Pasotti, a researcher who has studied the organisation’s early archives, said the topics under discussion reflected the concerns of European bankers throughout the second half of the 20th century.
While in the 1950s there was much discussion about the formation of subsidiaries in former colonies, by the 1960s attention had turned to the international role of the dollar, problems with the Bretton Woods system of fixed exchange rates and the threat of American takeovers of European banks.
Towards the end of the century, the IIEB talks were more concerned with the impact of the euro, the growing derivatives market and M&A deals between big banks.
“There are only a small number of photos from the gatherings in the archives, which are mainly from dinners, cocktails evenings and visits to museums and palaces,” said Pasotti. “That underlines the confidential nature of the meetings.”
There are just 18 photographs within Italian lender Intesa Sanpaolo’s archives of the early years of IIEB events.
The club’s desire for secrecy makes some members sensitive that it is perceived from the outside as a cartel. They insist the banks are still commercial competitors.
In one of the few publicly disclosed speeches given to the IIEB, European Central Bank vice-president Lucas Papademos began addressing the October 2006 IIEB meeting in Athens by quoting Adam Smith’s warning against collusion from The Wealth of Nations: “People of the same trade seldom meet together even for merriment and diversion, but on those occasions when they meet the conversation ends in a conspiracy against the public or some contrivance to raise prices”.
Papademos continued: “If he could have seen this gathering of top bankers from across Europe, would he have expressed such an opinion, which would also be a cause of alarm for a central banker because of the potential ‘contrivance to raise prices’? I very much doubt it.”
The Swiss finance ministry and national bank confirmed, respectively, Keller-Sutter’s and Jordan’s attendance at October’s Zurich meeting after being contacted by the FT. They also provided details about what they discussed.
During Keller-Sutter’s speech, she blamed the collapse of Credit Suisse on its management, while Jordan also discussed the fallen bank as part of comments on financial stability.
Despite the importance of the topics under discussion, there has been almost no press coverage of the IIEB’s activities during its more than seven decades — apart from one meeting in May 2010.
Boman, who was then chief executive of Handelsbanken, quit the IIEB on the eve of a three-day get-together his bank was co-hosting in protest at the group’s lack of transparency and the costs of hosting such a meeting at the height of the eurozone debt crisis.
Host banks at IIEB meetings are expected to pay for accommodation and entertainment, while attendees’ employers pick up the bill for travel. The Stockholm event had included accommodation for more than 40 bank CEOs and their partners at the five-star Grand Hôtel, dinner at the city’s opera house and an exclusive shopping trip for spouses.
“We were not against having a meeting in Stockholm to discuss bank matters,” Boman recalled to the FT. “But the circumstances of the meeting — it being held in secret and having an extravagant participant programme with wives and husbands — we felt it was as far as you can get from Handelsbanken’s culture.”
Among the other leisure activities offered to spouses at IIEB meetups were motorbiking over ice fields during talks in Reykjavik in 2007 and a private tour of Lisbon’s hilltop São Jorge Castle in 2019 complete with tuk-tuk rides and pastel de nata tasting
High-profile guests are a staple of IIEB gatherings. In 2000 and again in 2009, the group was hosted by Prince Andrew, first at St James’s Palace and then Buckingham Palace.
At the IIEB’s first meeting in Russia, in St Petersburg in 2013, it received a speech from former president Dmitry Medvedev, while the club welcomed Recep Tayyip Erdoğan, now Turkey’s president, at a gathering in Istanbul when he was still the country’s prime minister.
In a rare public photograph from an IIEB event, Italian president Sergio Mattarella can be seen at Rome’s opulent Quirinal Palace in 2015 addressing a room of bank CEOs including Sergio Ermotti of UBS and former Lloyds Banking Group boss António Horta-Osório.
Dealmaking between banks is a common topic of conversation on the sidelines of official business, according to members, although most of the talk is hypothetical. But one of Europe’s biggest ever bank M&A deals was sealed at an IIEB meeting at the Brussels Hilton in 1997.
There, Swiss Bank Corporation chief executive Marcel Ospel and his counterpart at Union Bank of Switzerland, Mathis Cabiallavetta, agreed to the $29.3bn all-stock merger of Switzerland’s second and third biggest banks to form UBS.
Since then, Switzerland has always had three seats at the IIEB for the CEOs of UBS, Credit Suisse and Lombard Odier. Credit Suisse’s collapse last year has left a place free that Julius Baer’s chief executive will take at the institute’s next meeting, due to take place in Dublin in May.
Philipp Rickenbacher, who had planned to attend, quit the Swiss wealth manager last week after it wrote off SFr606mn of loans to beleaguered Austrian property group Signa.
But it is not only bank business that is discussed. One member recalled receiving a phone call from Eddy Wauters, the long-term general secretary of the IIEB who had been chair of KBC Bank.
Wauters was a former professional footballer, who had represented Belgium and befriended Marilyn Monroe while playing in the US in the 1950s. He went on to become manager and later chair of Royal Antwerp football club.
Wauters was calling because Royal Antwerp were negotiating the sale of a player to a club in the bank CEO’s home country and he wanted to know whether the buying club had any financial difficulties and if it was likely to pay the agreed fee in full.
The inquiry showed the IIEB was meeting its main aims, according to the CEO. “This is a very special organisation,” they said. “It is all about information sharing and promoting friendship among CEOs.”