Martin Pcola recalls arriving in Luxembourg in 2008, merely two months prior to the collapse of Lehman Brothers, then the fourth largest US investment bank, which had become immersed in and later synonymous with the sub-prime crisis. 

The East West United Bank (EWUB) CFO called it an “impactful year”, not just for the crisis but also due to uncertainty as he was changing countries, and he’s convinced it influenced how he manages today. But he also praises Luxembourg’s steady thinking then. 

“We compared to the countries where we were coming from in Central Europe,” adding that based on his experience there, “people would be panicking, or they would be working much more emotionally rather than rationally.”

Pcola’s career, which included roles at Deloitte, Ernst & Young and Amazon, has taken him to Prague, Bratislava, Luxembourg and beyond. But he praises the grand duchy’s clear-headedness nowadays too. “Here in Luxembourg, it’s such a unique composition of people from all around the world, different industries and experiences, that helps to have someone within decision-making bodies take a step back, maybe reconsider.”

For Pcola, who’s responsible for finance, risk and IT among other areas at the Russian bank, this crisis is much more “social” than the 2008 one, and he sees millenials as key to the productivity to stem out of this period, but some lessons learned then still apply today.

Changing priorities for clients

EWUB has, like other businesses, accelerated IT since the arrival of covid in Luxembourg. Pcola says that the team--which counts over 100 employees and 25 nationalities--“at a very early stage” made internal adjustments, including transparent communication so staff would feel secure, and empowering middle management as they became more independent. 

But it was also about “creating something so that once this crisis is over, we can continue to build up what we have created. And I think this spirit helped to operationally go through the crisis.”

There are, of course, changing needs for EWUB clients. “We are servicing cross-border clients, from the eastern part of Europe [and] beyond the borders of the EU,” he says. “The closing of borders…heavily affected our ability to be in contact--not just with clients, but mainly with prospects.”

While March through September 2020 served as a “standardisation period” to best understand how to work differently, he says “from September we have also seen the business started to accelerate”. Although they could no longer present in person to potential clients, “we're anxious to learn how to attract potential clients through the new channels.”

The CFO says that 2020 was meant to be a development year and infrastructure investment had been planned for 2019-21 to scale up and modernise activities. Despite an "idle" growth in clientele over the first three quarters of 2020, Pcola says this was temporary. "The bank has grown up its FTEs by more than 25% in 2019 and continued further growth in 2020 as well, in order to complement experts’ teams mainly in information technology and front office functions. While total assets remain stable at a level of €700m in 2020, the investment revenues as well as net operating income has slightly decreased on [a] year-on-year basis, reflecting on one hand decreased market yields and continued infrastructure developments."

The main strategy moving forward? “We still aim to build up on our origins,” Pcola says, “being the intermediary and facilitator of financial flows and of business between Europe and eastern countries,” as the bank’s name suggests, be that in addressing “the exact needs to either our clients here in Europe having business interests or financial flows with eastern countries, or our clients coming from eastern countries and having their business here in Europe.”

A main focal point will continue to be on individuals and wealth preservation. “There is always an interest to have a certain part of the wealth being preserved for the future for retirement because there is, let's say less social security” in certain countries--a service they envision scaling across a broader clientele as well.

Pcola adds, "While over the years and it has been quite a significant period of time now that countries have developed in eastern Europe, it has created quite strong upper middle class of the clients, which also has accumulated over the decades of their work wealth that they would like to preserve, and that they would like to diversify from the risks they are running with their businesses in those countries.”

Some of those clients are hoping to invest in other regions in a bid to diversify risk. The acceleration of digitalisation should also help increase transparency in taxation, so potential clients can better understand how their wealth is faring, Pcola adds. 

The CFO says that the bank also wants to intensify and simplify transactional banking services for SMEs, as well as to become more present on the European market. 

“As we can see how we can serve clients which are doing cross border business between Europe and Russia, we believe that these type of tailor-made services might find its place also just within Europe or in other geographies.”

A more social perspective

Pcola remains fairly optimistic about overall 2021 trends as well. He refers to the "extreme shock" that has come not just to the market but also with "the current running of the world... the current crisis is very different to what we've lived in the past two decades [and] this time  it's much more a social crisis in general."

That said, Pcola has praised not just Luxembourg but, more broadly, "politicians, central banks and regulators and everybody who influences macroeconomics [who have been] much more prepared," which has led to better resistance this time around. Pcola said that thanks to their own strategies, "our investment portfolios have not been influenced by any significant credit quality deteriorations and remain very stable despite very challenging and turbulent market conditions. We believe that recovery of the current trend shall be seen starting second half of 2021 and continued through 2022."

Nevertheless, "I think we have not yet seen completely the effect. And that's why when asked what I expect will come in 2021, where I think it is only now we will see the shock effect more elegantly. While it does not necessarily mean that it will be some negative or very negative shock, it will mean that the future might become a little bit more predictable, because first of all, there are more tools, which are more known also to countries how to work with this pandemic come to work with the virus, or how to live with it.

"This crisis took everybody by surprise [but] there is no blame game. [We have] to try as best  to resolve the situation from a more social perspective."

Updated on 27 January to correct typo concerning FTE