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.
Unless Euan Sutherland’s resignation letter is published in full, the context of his claim that the Co-operative Group, where he is chief executive, is “ungovernable” will remain unclear. But it is a strange declaration for any professional manager to make: cats are ungovernable; humans, however cussed and contrary, generally do respond to direction. How they are directed is another matter.
The Co-op is a strange beast, as the saga over Co-op Bank chairman Paul Flowers’ appointment and eventual disgrace revealed. But I think Mr Sutherland has been doing a decent job of taming it. He took some flak last month for appearing to ask Co-op members – and the general public – how the group should be run, rather than setting his own strategy. I read this, however, as a clever combination of an advertising campaign, an opinion poll, and a response to those insiders who disliked his management style. Read more
One notable statistic about Russia is that the mean wealth of its 110m adults last year was $10,980 while the median was $870. In other words, if the country’s assets were equally divided, the man in the middle would possess more than $10,000 but, in practice, his net worth is less than a 10th of that sum. This is the result of 110 billionaires controlling 35 per cent of the wealth.
Antony Jenkins’ efforts to change the culture of Barclays by cutting bankers’ pay are on hold. At its investment bank, it is paying bonuses that are 13 per cent higher to “compete in the global market for talent”. The bank’s chief executive wants to reform the pay of US and Asian investment bankers but it is beyond his contro
Following the recent news that some investment banks had decided to make working conditions more palatable for junior employees, one former intern emailed the FT a poem he wrote last summer while completing a stint at a bank.
On rings the cow bell,
Bringing cattle to their shed
Buy sell, buy sell
Work, work, work until you’re dead.
Paul Flowers: tests put the board off the scent
The idea that Paul Flowers – the disgraced former chairman of the UK’s Co-operative Bank – might have got the job largely because he aced a set of psychometric tests is, on the face of it, astonishing. As we now know, the Methodist minister had little previous banking experience and is being investigated for allegedly buying illegal drugs.
But unfortunately it is increasingly easy for executives to allow the apparent certainty of test data to overrule more subtle and more serious concerns visible to mere human beings. Read more
In the dreary annals of presentations about corporate values, ABN Amro chairman Gerrit Zalm’s recent performance for the bank’s annual cabaret as his brothel-keeping “sister” Priscilla will take some beating.
For years, getting a job at a Wall Street bank, a Magic Circle law firm or a blue-chip management consultancy was a route to a very rewarding career in return for an awful lot of work. Lately, the bargain has lost some of its appeal to the best and the brightest.
Credit Suisse is the latest investment bank to issue an edict aimed at protecting the work-life balance of its junior employees – and it is getting roasted for it by bankers themselves.
Bloomberg reported (and the bank confirmed) that Jim Amine, global head of investment banking, had decreed in a memo that “analysts and associates in the US investment banking division should be out of the office from 6 pm Friday until 10am Sunday unless they’re working on an active deal”.
So ordered. Except that commanding your ambitious junior employees to limit their workload – Bank of America, JPMorgan and Goldman Sachs have taken similar action – is quite likely to be useless, if not counter-productive. To change working practices requires a profound cultural shift, and judging from the reaction to the latest news that is not likely to happen soon. Read more
Few things are as alluring as optimism and Mark Carney sees the banking glass as half-full. The Bank of England governor has arrived from Canada with a dose of can-do spirit, casting off the pessimism of Mervyn King, his predecessor.
Life can be unfair and it often feels unfair even when it is not. Both JPMorgan Chase and UK energy companies such as Centrica know this feeling.
Trader A: Dude – seen the news from Markit? FT says they’re going to launch an “ambitious assault on Bloomberg’s grip on daily communications in financial markets with the start of a free viral messaging service”.
Trader B: How so?
Trader A: By bringing together the internal IM systems of Thomson Reuters, JPMorgan Chase, Morgan Stanley, and half a dozen other IBs, including my place and yours. Read more
Not long ago, Goldman Sachs was Wall Street’s lightning rod, attracting bad publicity and interventions from regulators. Its place has been taken by JPMorgan Chase.