THE 1980S BEGAN FOR ME OVER HALF A YEAR LATE, in the autumn when I left the army to return to Citibank and the real world. The atmosphere was now quite different from the over-politicized seventies. New routines and challenges awaited me, and the change was welcome. I became an expert on company finance. I was the new boy in the Helsinki office and naturally I had to deal with the most awkward customers.
These difficult customers were Finland’s major companies, who had close links to Finland’s big banks. From the forest industry there was Enso-Gutzeit. I also tried to sell our services to Rauma-Repola, Wärtsilä, and Nokia. Finland was still a country where forestry reigned supreme, but in reality there were few investments where Citibank was in a position to add value. State enterprises were out of reach for American banks. We were never the bank of choice for Nokia. Rauma-Repola, for its part, was looked after by the Bank of America. Even so I rolled up my sleeves and got down to work.
I now had to put into practice everything I had learned in London about customer care and negotiation. I mostly dealt with finance directors of my age or a little older. They certainly saw how the world was changing and wanted to know how to change with it. Usually their problem was a fifty-five-year-old finance director, stuck in his ways and unable to manage his ambitious subordinates effectively.
I went assiduously to cocktail parties. I forged links with economic editors, which would stand me in good stead later. Citibank usually got curiously positive publicity because in the Finnish finance world it seemed to have expertise and to be both small and challenging. Citibank could offer a breath of fresh, global thinking to the Finnish banking world, which was just opening up. Three small foreign banks were a modest example of the direction Finnish banks would have to take.
Finland’s big banks did their utmost to protect their domestic market from their competitors. The Soviet Union too was interested that American banks were setting up shop in Finland. The Soviet Union had its own banks, which had also set up offices abroad. The Soviet Union would surely expect to receive a license for its own banks to operate in Helsinki to ensure balance. But officials also had many good reasons to open Finland up to international banking competition. The international capital markets still had a slightly vague picture of Finland. We Finns paid a high price for Soviet neighborliness, in a literal sense, because the Soviet Union was known to have an influence on Finnish policy. We had to pay a premium for a political risk that was practically non-existent. But then the markets have never been particularly good at distinguishing details. Besides, the Soviet Union’s share of Finland’s foreign trade was so great that it posed a risk to Finland’s economy as a whole. And Finland was one of those dubious Nordic social democratic countries whose commitment to capitalism seemed a little uncertain, at least in the eyes of American investors. Finnish politicians and officials must certainly have expected American bank offices in Helsinki to send home the right signals about Finland and Finnish companies as a destination for investment, as indeed they did.
Officials also wanted to open up competition and compel Finnish banks to modernize. Foreign banks had less overhead than the big Finnish banks and could offer finance to companies more cheaply. Finnish banks’ balance sheets were simply too small for the international credit system. Foreign banks were also more efficient than Finnish banks in foreign exchange dealings and the securities market.
Citibank received permission to begin operating in Finland in November 1981 and started the following year. The conditions of the license were strict: the bank could not establish any additional branches, its share capital was limited to a small sum, competition on interest rates was restricted, and Citibank and the other foreign banks could not get involved in the financing of the lucrative Soviet trade.
Although the foreign banks did not grow very large in Finland, they changed the banking system there for all time. The big Finnish banks were used to financing, owning, and governing Finland’s major companies; they burbled happily of their “responsibilities to society.” This meant that the banks and their related insurance companies looked after companies’ affairs in good times and bad.
The banks lent their favored customers money even when they didn’t need it for business purposes.
Company investment policies were decided at board meetings where bank executives sat in. The forestry industry in particular was the banks’ special stomping ground: approval for the companies’ purchases, sales, and major investments rested with the banks’ boards. Young executives at the big Finnish banks quickly learned to flex their muscles in issues of management and finance. They might even imagine that they could run a forestry company better than the company’s own CEO.
The foreign banks’ arrival in Finland was like a small crack in the wall of a house, a sign of a distant earthquake. But those who looked ahead understood that the relationship between the banks and other businesses in Finland just couldn’t carry on as it had. Wise bank directors also foresaw that international competition would reduce the profits and profitability of Finnish banks, which depended on a close relationship with their customers.
I myself had no experience of the Finnish banking system since I had undergone Citibank’s American education instead. I thought that a bank’s job was to offer effective financial and capital services, often against tough competition, rather than to own, manage, or sell its customers’ businesses.
Customers should be able to do that for themselves. If their business went well, our customers would be sure to make money for Citibank, too. At Citibank we believed strongly in banking competition because we were used to operating in the world’s most competitive markets. With every Finnish customer we were the competitor, the challenger, and the alternative to the Finnish banks. In Citibank’s Helsinki office I built up my own team, responsible for half of Citibank’s corporate financing in Finland. I was happy with them. One of my best recruits was a young economist from eastern Finland, Kari Jordan, now the president of Metsä Group, one of Europe’s biggest forest industry groups.
I met many interesting senior people at that time, whom I got to know better later on. For example, I met Pekka Herlin of Kone over lunch in the early 1980s. Herlin was a taciturn and grumpy figure, but he conveyed authority and gravitas. It wasn’t his role as the owner of a major company that gave weight to his words, but his vision and his grasp of the issues. The gruffness of his persona added its own mystique. There was a lively discussion at the lunch table of the international economic situation, high interest rates, and the sustainability of the finance system. Herlin made sure he was always the hub of the conversation.
Liisa and I had settled down on the coast a few miles west of Helsinki, in a pleasant modern terraced house. We had two more children now: Anna, born in 1981, and her brother Matti, two years younger. I was present at the birth of all three of our children, though I am sorry to say that I was five minutes late for Matti – we had a lively discussion about that. Most of the housework fell to Liisa, even though she was building her own career as a civil servant. But I ironed my own shirts up until the beginning of the 1990s, when we finally started to employ someone to do the cleaning and ironing. Our lives were full with work, family life, and children. Around this time we also acquired a summer cottage in Orivesi, a beautiful small town (or large village) about two hours away – not far from the original Nokia, as it happens. There we did odd jobs, fished, and met our friends. We had an ordinary Finnish life, in short.
Patience has never been my strong suit, and particularly not in the early 1980s. Though I would never go back to being an academic, I had to keep going forward. Or perhaps it was because I had left my academic roots behind me that I wanted to face the next challenge. I was now thirty-four, and as I looked around Citibank I saw lots of eager professionals, many of