Technology has its eyes on banking. Apple is expected this week to launch Apple Pay, its touchless payment system for iPhones; venture capital funds are pouring money into “fintech” start-ups; and Marc Andreessen, the technology entrepreneur, talks of “a chance to rebuild the system. Financial transactions are just numbers; it’s just information.”
Mark Carney © Photo by Chris Watt – WPA Pool /Getty Images
Mark Carney, governor of the Bank of England, would not win a popularity contest among directors of banks at the moment. Yet he and the Bank are taking a stance on individual responsibility that most people think is long overdue. Read more
If I ever rise to become chief executive of anything and I’m looking for yes-men to people my boardroom table, I shall make sure I employ a bunch of merger and acquisition bankers.
At the end of every quarter, to coincide with the publication of M&A rankings that they yearn to top (while professing indifference), these bankers boast about the fullness of their pipelines, the strong prospect for strategic deals, and, implicitly, the promise of more fees. As the illustration below shows, their outlook is at its rosiest-tinted just before a downturn.
In spring 2001, for instance, as deal volume plummeted, the esteemed Simon Robey, then co-head of M&A at Morgan Stanley, pointed out that “the fundamentals of the business have not changed, so when markets stabilise, we should see announcements of deals that are currently in the pipeline”. A truism, of course, but deals did not recover their 2000 peak until 2006. (A partial hall of shame of retrospectively regrettable M&A banker quotes appears at the bottom of this post.)
On Thursday, Scotland may set out on the bumpy path to independence from the rest of the UK. Its banking system is likely to work only if it is braver and more far-sighted than Alex Salmond, the Scottish National party leader, during the campaign.
Every time I hear about a company relocating its headquarters I think of the Marvin Gaye song “Wherever I Lay My Hat (That’s My Home)”. A hit for Paul Young in a 1983 cover version, its hummable melody cloaks an unattractive sentiment, voiced by someone with dubious motives.
The other day, a business in New York mailed a dollar cheque to me across the Atlantic. It was a pretty thing – multicoloured, with an anti-fraud foil hologram – and I admired it for a while before putting it into another envelope and posting it back to a friend in New York to walk up the block and deposit. After a round trip of 7,000 miles, it reached my account three weeks late.
While waiting in a big Manhattan hospital about 15 years ago, I glimpsed the chairman of one of the world’s biggest banks in a consulting room. I never found out why he was there. If he was ill, his employer never said and the man is now enjoying a long and apparently healthy retirement.
Given that financial crises are caused by herd-like behaviour by banks, it is hard to know whether to be encouraged or dismayed by the latest mass shift – away from investment banking and toward retail and commercial banking.
The Bank for International Settlements annual report, published today, finds that one-third of banks that entered the financial crisis in 2007 as wholesale-funded or trading institutions switched to retail banking by 2012 (19 out of the 54 in its sample). Read more
No-one emerges well from the legal battle between Goldman Sachs and Deeb Salem, its former mortgage trader who claims that his $8.25m bonus for 2010 amounted to severe underpayment. It is no wonder that Goldman tried to seal the documents in what it calls an “utterly ridiculous” case.
The problem for Goldman and other Wall Street firms is that they have encouraged that sense of entitlement among employees – one that strikes almost everyone outside Wall Street as delusional. Mr Salem’s claim is merely an extreme example of a much wider problem.
Presumably, although he denies it, Brady Dougan considered resigning as chief executive of Credit Suisse this week when it became the first global financial institution since Crédit Lyonnais in 2003 to plead guilty to criminal felony in the US. In any case, he stayed.
Colin Fan, co-head of Deutsche Bank’s investment bank, is about to become very famous. His short video sternly admonishing traders for their online conduct and warning them that being “boastful, indiscreet and vulgar” will have “serious consequences for you personally” is certain to go viral.
Doubtless, plenty of investment banking and trading veterans will say he is trying to sap trading floors of their very lifeblood. Where would the City, Wall Street and even Frankfurt be without a certain amount of boastfulness, indiscretion and vulgarity? Well, not as deep in the reputational hole they currently find themselves, I would say. Read more
A speech by Lionel Barber, Financial Times editor, at Hughes Hall, University of Cambridge, May 1, 2014. An accompanying video can be viewed here.
Ladies and gentlemen, distinguished guests, I am delighted to be here tonight at Hughes Hall in the University of Cambridge. This is the prestigious City lecture, but sadly I will not be providing slides. As Lord Acton might have said, power tends to corrupt, PowerPoint corrupts absolutely.
Tonight I want to talk about bankers and banking. These days, bankers are widely viewed as greedy, self-serving, amoral or actually dangerous. Estate agents, even journalists, are held in higher regard.
This past week’s kerfuffle over bonuses and remuneration at Barclays and Royal Bank of Scotland is a reminder that bankers continue to be held responsible for the financial crisis and the economic calamities which followed.
Bankers appear to be living in a parallel universe, where the rewards are far out of kilter with what the rest of society can expect. This speaks to a deeper unease about inequality which explains the unlikely best-seller on economics, Thomas Piketty’s Capital in the Twenty-First Century.
My questions tonight are: Can bankers mend their ways and their reputations? Is there a path to rehabilitation? Read more
Managers are notorious for prioritising short-term demands when they clash with long-term goals. Research in the US has shown that most executives would shy away from a value-enhancing long-term project if it caused them to miss a quarterly earnings forecast.
How companies can manage such clashes was the subject of a “Strategy Live” debate organised by the Financial Times in London this morning. Chaired by management editor Andrew Hill, the session featured senior figures from finance and industry, who spoke on a non-attributable basis under the Chatham House rule.
Participants used the example of Barclays to launch a broader debate, examining its controversial decision to increase bonuses to its investment bankers even as it – seemingly paradoxically – tried to move to a less abrasive, more long-termist culture. Read more
What is Goldman Sachs up to? The bank has been behaving strangely this week. When Michael Lewis unveiled his book Flash Boys: A Wall Street Revolt , in which he alleged the equity market is “rigged” by high-frequency traders, the bank discreetly lent him support. Then it emerged that Goldman is leaving the New York Stock Exchange floor, selling Spear, Leeds & Kellogg, a broker it bought for $6.5bn in 2000.