Monthly Archives: October 2012

John Gapper

Having become accustomed over the years to the calm, soothing, “don’t panic” talk of financial regulators, it was a shock to read Andrew Bailey, the senior UK banking supervisor, bluntly describe banks’ risk models for commercial real estate as “bogus”.

Mr Bailey clearly has very little, if any, time for banks’ internal risk models, which calculate how much they might lose in stressed market conditions, and therefore how much they need to put aside in capital.

As Brooke Masters reports:

After two decades of working with failed and failing institutions including Barings, HBOS and Royal Bank of Scotland, he was openly sceptical of bankers’ ability to police themselves.

Their commercial real estate risk models are “bogus”, he said, and their internal stress tests “are not stress at all, they’re mild, it’s a failure of imagination”. As a result, banks “never should have been allowed” to use their own models to determine capital requirements as currently permitted under the Basel rules.

 Read more

John Gapper

Larry Page, Google's chief executive

It isn’t often that the Daily Mail splashes on a US stock exchange announcement, so the fuss over Google’s botched disclosure of its third quarter results – and the plunge in its shares on Thursday – is a big event.

The lesson I take from it is that it is awfully hard for a public company to ignore the clamour of the stock market. Larry Page, Google’s chief executive, turned up on the earnings call to explain the premature release of the results, despite the medical condition that makes his voice hoarse.

When Google floated in 2004, Mr Page and Sergey Brin, his co-founder, insisted that they would ignore quarterly results and manage the business for the long term: Read more

John Gapper

The likely end of BP’s tempestuous, yet profitable, partnership with a group of Russian oligarchs in TNK-BP is a moment to tot up the costs and benefits. Financially, it came out on top, but it certainly suffered along the way.

I’ve kept an interested eye on TNK-BP since writing about the energy venture in 2003, when it was formed. I judged then that it was worth it for BP to risk being stitched up by its new partners (the article is not online): Read more

It is somehow apt that the explanations for the sudden departure of Vikram Pandit from Citigroup this week were utterly baffling. “No strategic, regulatory or operating issue precipitated the resignation,” said Michael O’Neill, the bank’s chairman. “I had a very good conversation with Mike O’Neill,” insisted Mr Pandit.
Yeah, right.

Andrew Hill

Michael Corbat looks like the most conventional chief executive Citigroup has appointed for 10, even 20 years. Certainly over the past decade, for a blue-chip, Fortune 500 banking institution, Citi has been led by a remarkably diverse range of CEO types:

1) An entrepreneur: the irrepressible Sandy Weill with his gargantuan appetite for deals. Having alienated his protege Jamie Dimon, Mr Weill appointed….

2) A lawyer: Chuck Prince, his general counsel and long-time legal fixer, who lasted only four years before being forced out as the banking crisis built, to make way for…. Read more

Andrew Hill

Simon Fox of Trinity Mirror, the UK newspaper and publishing group, is the latest chief executive to attempt to give a restructuring plan a sense of focus, simplicity and unity by attaching “One” to the company name. “One Trinity Mirror” – which unifies the regional and national newspaper divisions under a “flatter, more efficient management structure” – follows in the footsteps of One Ford, One Siemens, and One Anglo (at Anglo American), to name just a handful.

I prefer the “One” theme to some of the other names applied to past restructurings. Among my least favourite: “Shape 2012″ at Metro, the German retailer (“Pear-shaped 2012″ would have been more appropriate, as one observer pointed out ); Reuters’ “Fast Forward” – a scheme that predated the Thomson merger and led to mordant humour among the newly redundant about having been “fast-forwarded”; and law firm Linklaters’ “Project New World“, with its sinister Aldous Huxley overtones. Read more

Once upon a time, in a not-so faraway land, an evil poisoner stalked the apothecaries’ aisles, tainting the good things there and spreading fear, until a wise leader decreed the shelves should be cleared. Behold, the danger was averted and trust was restored

Andrew Hill

As Felix Baumgartner struggled to correct his spin at the start of his 128,100 ft descent to earth on Sunday, I couldn’t help thinking of the consequences of failure for Red Bull, his sponsor.

Mr Baumgartner’s feat was obviously extraordinary and compelling. It was a new frontier for him, and for YouTube (where 8m people watched the dive live), but despite strenuous efforts to identify some great scientific benefit of the stunt, it is a far greater leap for brand-marketers – and I worry where they will go next.

The Austrian’s sponsor is an introverted company with an extrovert energy drink brand and it has blasted out a niche in extreme sports, from Formula One to air races. Plenty of people pointed out on Twitter on Sunday that if Mr Baumgartner died, so would Red Bull’s slogan “Red Bull gives you wings”. Read more