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Opinion

Abigail with attitude: Unlucky

Suddenly, the clouds converged and the warm spring sunlight dimmed. This was how I felt when I read that 47-year-old Pietro Ferrero, chief executive of the Ferrero group, and heir to one of Italy’s biggest fortunes, had died of a suspected heart attack. Ferrero died while bicycling on a coastal road near Cape Town during a break from a business meeting in South Africa. US treasuries

This story intrigued me. It reminded me that you can have material success and yet be unlucky. It also reminded me that even when everything looks perfect, danger lurks. I wonder if US Treasury secretary Timothy Geithner had a similar wake-up call in mid-April when he learnt that Standard & Poor’s was downgrading its outlook for the US’s triple-A long-term credit rating. This is a momentous event: we always used to talk about US treasuries as the risk-free rate. Treasuries are no longer risk-free. Of course one can quibble that the rating agencies lack credibility after their myopia during the financial crisis. However, it would be foolish to behave like an ostrich and deny that the US is spending profligately and keeping interest rates at unnecessary emergency levels.


"I wonder if US Treasury
secretary Timothy Geithner
had a wake-up call in mid-
April when he learnt that
Standard & Poor’s was
downgrading the outlook
for the US’s triple-A long-
term credit rating. This is
a momentous event: we
always used to talk about
US treasuries as the risk-
free rate. Treasuries are
no longer risk-free"

Alan Greenspan, the previous Federal Reserve chairman, unleashed two bubbles (dotcom and housing) on the US economy by keeping interest rates too low. Might Ben Bernanke be following in his predecessor’s footsteps? Independent Commission on Banking

The interim findings of the UK’s Independent Commission on Banking were hardly a bolt from the blue. In fact, some of the key points seem to have been leaked to the media. After months of speculation and stamping of bejewelled booties by British senior bankers, the panel has produced a damp fire cracker, albeit a well-written and thoroughly researched damp fire cracker. Am I being too harsh if I complain that there is a whiff of compromise, consensus and "don’t rock the boat"?

In essence, the commission proposes that UK universal banks ring-fence their retail operations within separately capitalized subsidiaries. This stopped short of forcing the big banks to divest their investment banking divisions. The commission also suggested introducing greater loss-absorbing capacity for systemically important banks.

The panel was an eclectic group. Chairman Sir John Vickers is an academic who has worked at the Bank of England and run the Office of Fair Trading. As warden of All Soul’s College, Oxford, he is obviously brilliant but probably a supporter of the establishment. His colleagues were Bill Winters, previously co-head of JPMorgan’s investment bank; Martin Wolf, the chief economics commentator of the Financial Times; Martin Taylor, who used to run Barclays Bank; and an obligatory woman, Clare Spottiswoode, a former regulator of the gas industry. Of these five musketeers, the only person who might have wanted to shake things up could have been Spottiswoode. However, her radical voice might have been drowned out by others with greater knowledge of the banking industry. The ultimate test of the commission’s work will be the next financial crisis.

Lloyds

There is a discrepancy between senior bankers, who grumble that they have been made scapegoats for the financial crisis, and the general public, who think senior bankers are untethered goats who should be boiled in a large vat to make shoe leather. The commissioners did try to win popular acclaim by bashing Lloyds Banking Group. Poor old Lloyds, which has become the poster child for all that went wrong in the era of excess, has now been told it might have to sell more branches than was agreed with the European Commission.

I wonder if urbane António Horta-Osório keeps a dartboard in his office with the faces of the unfriendly commissioners glaring down at him. When the frustrations of running a lumbering public-sector institution (UKFI owns some 40% of Lloyds) overwhelm him, Horta-Osório can take careful aim. "I have limited sympathy for Lloyds," a mole sniffed. "They tried to do a sweetheart deal to buy HBOS and circumvent the competition requirements. They’ve taken a lot of pain with that acquisition and now they want some pleasure. Well, the commission has put its foot down. Unfortunately, Lloyds was the puppet of the Labour government’s muddled response to the financial meltdown. But don’t forget, the previous Lloyds management – Eric Daniels and Sir Victor Blank – were complicit in this shameful episode. Horta-Osório is clearing up the mess after the football hooligans have vacated the pitch."

Have you noticed that now they seem to have got their way, UK bank chiefs are keeping a very low profile? "That’s exactly as it should be," a source said. "None of us want to hear from these overpaid egomaniacs."

The sparkling Diamond hosted a fundraising cocktail party at his Chelsea home for New York senator Kirsten Gillibrand with a requested donation of $2,500. Was that per couple or per plate?

But isn’t it a bit boring that we don’t have any more episodes of ‘Big, bad bank CEO versus little, down-trodden UK citizen’? Apart from a dark hint that the H and S in HSBC might be of consequence when it came to where the bank was headquartered, we’ve hardly heard or seen Stuart Gulliver. Lloyds’ Horta-Osório is the new boy and so is ducking out of sight. And as for RBS, am I the only person who has difficulty remembering the name of its chief executive? One has to secretly give thanks for the glamour, in an otherwise grey world, provided by Barclays’ Bob Diamond. The Financial Times recently devoted several paragraphs to a story that the sparkling Diamond had hosted a fundraising cocktail party at his Chelsea home for New York senator Kirsten Gillibrand. The paper claimed that 25 people, mostly London-based US financiers, paid a $2,500 "requested donation" towards Gillibrand’s re-election campaign. Now I wonder if that was $2,500 a couple or $2,500 a plate? Obviously if you amortize the entry fee over the number of canapés nibbled, the return on equity devoured would be paltry. But which of us would not have loved to be there? Naguib Kheraj

Might Naguib Kheraj have been a paying guest at the function? Although not a London-based US financier, Kheraj is an FOB (friend of Bob) and a previous Barclays finance director. He officially left the firm in the spring of 2007 when a new finance director, Chris Lucas, was appointed. However, Kheraj lingered on as an adviser on the poorly judged and ill-timed bid for ABN Amro. Now, after a few years at JPMorgan Cazenove and a remarkably short interlude at Lazard International, Kheraj has bounced back to Barclays as a vice-chairman. According to the press release, Kheraj will be a senior adviser on a range of commercial and policy matters to Bob Diamond and Chris Lucas as well as other members of management across Barclays’ global operations. Diamond is quoted: "I look forward to working with Naguib as a colleague once again. He made a significant contribution as a member of the management team, and we valued his insight immensely as an external adviser. His knowledge and experience will be a huge asset to Barclays during the months and years to come." Kheraj will split his time between the UK bank and charitable activities. An insider murmurs: "Naguib has a good strategic brain and Bob trusts him."

I remain bemused by the Kheraj saga. As I wrote in my March column (see Abigail with attitude: In exile), it is hard to understand why such an intelligent person was unable to sort out his diary commitments so as to accommodate the role he had agreed to undertake at Lazard. I am not however as negative on Kheraj’s reappearance as one source, who groaned: "Oh for goodness sake, it’s just jobs for the boys." Nevertheless, I remain as unimpressed by the vice-chairman title as I was five years ago when I wrote in one of my early Euromoney columns: "Whenever anyone hands me a card with the title ‘vice-chairman’ emblazoned on it, I mentally file them in the graveyard section of my Rolodex. Do you know a real ‘player’ who is a vice-chairman? The initials VC for me are synonymous with virtually comatose and voiceless cipher." No one who has worked with Kheraj (we were colleagues years ago) could accuse him of being comatose or voiceless, although he does have a tendency to speak softly. Perhaps he will prove the exception to my VC rule.

Kheraj was briefly chief executive of Lazard International. Shortly after he bolted from the firm, we received news that 62-year-old Ken Costa, chairman of Lazard International, had also resigned. To lose one senior employee is odd, to lose two in six weeks hints at turmoil at the top. Lazard was unforthcoming about the reasons for Costa’s departure and Costa himself could not be reached for comment. But I am starting to wonder if all is well at the international operations of Lazard. It will be interesting to see the first-quarter results, which will be released shortly after we go to press.

Bank of America

Commentators were also taken aback by a change of senior personnel at Bank of America. In April, after only a year, the firm replaced its CFO, Chuck Noski, with Bruce Thompson, the bank’s chief risk officer. Glenn Schorr, an analyst at Nomura, wrote that the replacement of Noski was an "eyebrow-raising event". The reassignment of Noski came shortly after a communications mishap concerning a potential increase in the bank’s dividend. According to the Wall Street Journal, an SEC filing, referring to the fact that the Federal Reserve had objected to such an increase, had not been seen by Noski or Neil Cotty, the chief accounting officer. This filing was slightly different from an earlier statement on the matter that did not allude to the Fed’s objection. All this looks messy and – some might say – unprofessional. I have previously expressed concerns about the bank being headquartered in Charlotte, that well-known global financial centre. Might the double-D (divi disaster) have occurred because senior officials were scattered in various locations?

I understand that Noski worked from Los Angeles. Even so, one might wonder why the bank finds internal communication so arduous in this era of the internet and mobile phone. Chief executive Brian Moynihan has ordered an internal inquiry into the matter. Noski will remain with the bank as a vice-chairman – need I say more?

Amidst all this confusion, I am delighted to report that there is also clarity. Over at the investment bank, chief executive Tom Montag has issued an edict appointing three co-heads of the client side of the business. This reorganization is meant to integrate more effectively the former Bank of America and Merrill Lynch wholesale client origination efforts. Paul Donofrio, Christian Meissner and Michael Rubinoff will take joint global responsibility although each man has a separate area of focus. I am pleased for Meissner, who joined the bank last summer from Nomura. He now has a much larger role as his previous sphere of influence was limited to the EMEA region. I have liked Meissner ever since I obtained his mobile number from a mutual friend and rang him up to berate him about some perceived misdemeanour at Nomura. He could not have been more charming on that occasion and he continues to be a delight to deal with: unstuffy and open. I wish him well in his new role.

How was your month? Please send news and views to abigail@euromoney.com

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