In the early 1990s Budapest was a good place to be for an ambitious investment banker. Hungary’s privatization programme was in full swing, and western investors were queuing up to buy into central Europe’s most developed economy. But capitalism had its downsides, as one young investment banker discovered.
“One night we were working late on a transaction and one of my junior colleagues said to me: ‘You know, when they told us about democracy and the market economy, they said we’d be able to buy the same products as in Vienna. Nobody said anything about working until two o’clock in the morning’,” recalls András Simor, who was head of Creditanstalt’s Budapest operation at the time.
Simor himself had been bitten with the capitalist bug more than a decade earlier, when he arrived in London in 1979 for a six-year spell at Hungarian International Bank. An offshoot of Hungary’s central bank, the UK-based lender was an unlikely leader in global forfaiting.
“It was a fascinating little bank because it was doing everything you would not expect a bank owned by Hungarian government at that time would do in the City,” says Simor. “It was totally commercially run, the staff was completely international and it was extremely profitable.” Indeed, it was so successful that – as an astonished British journalist reported in the early 1980s – its managing director earned more than the chief executive of Barclays Bank.
Simor returned to the central bank in Budapest in 1985.
“From the moment I got back I was waiting for an opportunity to get engaged with markets and the market economy,” he says.
His chance came in early 1989 when he was recruited by Creditanstalt to head up its new operation in Hungary. A joint venture with local lender Budapest Bank, the unit was the first investment banking brokerage opened by a western bank behind the Iron Curtain.
Creditanstalt’s initial aim in setting up in Budapest was to get involved in the fledgling domestic bond market. Unfortunately, by the time the new firm was set up, a sharp spike in inflation and interest rates had put paid to that idea.
We were not developing as fast as our neighbours- András Simor
Instead, Simor and his colleagues started offering money market brokerage services to banks.
“It was an extremely simple business, but we made a living and the firm had an income,” he says. “So that was year number one.”
Then the Berlin Wall fell. Suddenly privatizations were on the table and all eyes were on the equity market and Budapest’s new stock exchange. Creditanstalt Securities started trading equities in mid 1990 and by the following year was managing the first Hungarian IPOs. Over the next few years the newly rebranded CA-IB led nearly every equity listing of any size in Hungary, including the largest privatizations in every sector from telecoms to pharmaceuticals.
In July 1997, following Bank Austria’s acquisition of Creditanstalt, Simor was called to Vienna to merge the investment banking arms of the two firms. He only stayed one year in Austria, however, before returning to Budapest to run Deloitte’s Hungarian office. During this period, he became increasingly concerned about Hungary’s failure to build on its early economic success.
“We were not developing as fast as our neighbours in central Europe,” he says. “It got me frustrated and I got interested in what could be done at the macro level to get the country going.”
He attracted the attention of senior politicians, including Socialist prime minister Ferenc Gyurcsány.
“He invited me to parliament to have lunch and discuss ideas,” says Simor. “One thing led to another and then one day he phoned me and said: ‘Do you want to be the governor of the central bank?’”
As neither an academic nor a central bank lifer, he was an unorthodox choice for the job – but he says his professional background gave him valuable perspective.
“I feel I was probably closer to the markets than some of my colleagues,” he says.
Hopes of being able to restore Hungary’s competitiveness, however, were quickly dashed. Instead, Simor found himself fire-fighting as the country’s economy spiralled downwards.
By October 2008, he was negotiating with the IMF for a standby agreement: “They said: ‘If we’re going to bring a lot of money into Hungary, we need to be sure that it’s not going to go out the door the next day through foreign banks repatriating capital.’
“So I called each of the six largest foreign banks in Hungary and got commitments from them not to take money out of the country. That was the forerunner of the Vienna Initiative.”
Simor’s careful stewardship of the Hungarian central bank won praise from the financial community but put him on a collision course with Viktor Orbán’s monetarily lax Fidesz government, which took power in late 2010.
After an increasingly fraught stand-off, he left the bank at the end of his term in 2013.