Barclays does not 'fall short'

As some in the Media and Analyst community may want you to believe. I am the first to be sceptical when banks make grandiose announcements about the goals they try to achieve. But succeeding in investment banking is a game where those who last the course will win out in the end. Nervous prodding by analysts and media should not divert management's attention too much. The way the competitive landscape has unfolded over the past few years should allow Barclays to slowly but steadily up the rankings. Profitability is under pressure at all banks and no one can be sure what the new banking world will look like in a few years. On a more mundane scale, even the refurbished branches of the bank look great when compared to the competition here in the UK.

Are Bankers really overpaid?

Are all bankers overpaid? This seems to be the conclusion when reading the news on a daily basis. But reports that hundreds of headteachers in London’s schools are now receiving annual pay packages of more than £100’000 indicate that generalisations are inappropriate. Heads enjoy generous holidays, there is very high job security and there is no competitive pressure. They also have managed to escape teaching duties to a large extent. One wonders how they fill their days given that personnel turnover in most school is also relatively modest. The main problem with banker's pay is the fact that senior bankers - CEO's and the top level of management - benefit to a large extent from weak corporate governance that is endemic in all public companies. But this problem should not be used to target bankers in general.

How to avoid employment tribunals - better people management

It may well be too easy in the UK to launch an appeal to an employment tribunal but it usually takes two to tango and without passing judgement about an ongoing case I want to argue that cases such as this one underline the need for careful staff assessments before and after hiring a person. All-too-often personnel decisions are based on academic achievement or (especially in finance) the numbers in terms of P&L. The qualitative aspects of management are easily neglected in a pressured enviroment and personality clashes can quickly escalate out of control.

UBS - curious selection of new board members

What is the 'politically correct' composition of a company board? We are not sure that board members are more than an in-house management consultancy. They certainly are far removed from the real owners of the company and even the fiduciaries in the asset management world have little say in the affairs of a board. But news that UBS has appointed two women to its board - one an academic economist and the other one a lawyer - raises some questions. Given the appalling track record of economists (you all know the many jokes about economists, as for example: An economist is a trained professional paid to guess wrong about the economy) one can not be too hopeful about these latest appointments. Don't forget the lawyers though: Q: Why won't sharks attack lawyers? A: Professional courtesy. Maybe selection by eye colour would be more effective. There may be a good cause for more women on company boards but we doubt that giving in those who expect miracles from this will be proven to be right in the long run. Whether or not a bank run by economists (Axel Weber, the incoming Chairman of UBS is another one) only time will tell.

Credit Traders accused of manipulating valuations

During the court case in which former senior credit traders of Credit Suisse are accused of manipulating the valuations of their trading books the revealing statement by one of them caught my eye: When a data-entry employee asked one of the accused “What sort of P&L do you need today?”  the trader responded that all books should end the day ‘up’ by $35 million” and the prosecution claimed that later one of the traders “artificially increased the prices of several ABN1 positions” to meet the trader's profit target. (Bloomberg BusinessWeek). This confirms our suspicion that the controls in many investment firms are woefully inadequate.

Dual CEO'S - if anything a formula to be promoted

The recent troubles at Blackberry manufacturer Research in Motion seem to suggest that dual leadership can be damaging for an organisation (FT). But Rome had two consuls during its rise to dominance, and they were limited in their power to a tenure of one year. Goldman Sachs in the late 1970s and early 1980s had co-chiefs - and that was when the firm laid the foundation to its rise to dominance. The challenge for boards and shareholders is to make sure there is a deep bench of talent - a thing that is sorely missing in many companies, why else would a company ever look for an external candidate for any of its top positions?

What is the future for banking pay?

Asks Gillian Tett (FT). When even the shares of Goldman Sachs, the company that is supposed to be the Gold Standard for banks, are at best marking time since the IPO in the late 1990s it becomes obvious that something is wrong not only with the compensation structure in the (investment) banking industry but with the whole business model (and the managements that are responsible for this state of affairs)

Why is Adoboli alone facing the music?

Seeing Kweko Adoboli as the lonely accused in the Courtroom creates a certain amount of sympathy for the young man. It is easy for senior UBS staff to pin all blame for the billion dollar disaster on one person. This makes it easy to escape blame for a  management culture that allowed a completely insufficient risk control to exist. Senior managers were busy enough chasing profits at any price with a firm eye on the next bonus payment they expected to receive. But Risk Management should mean that fail-safe procedures are in place - if necessary in triplicate - that make it impossible for any single person to play the markets the way Adoboli is accused of having done. Senior managers have been fired (with or without a 'golden handshake' as farewell present?) but should there not be other people facing justice in the courtroom? Oswald Gruebel may have wished for a more glorious end to his career, but he will certainly not feel any pain in his pocket.

Is there any 'Leadership' in the City of London?

The 'Leadership' of the City of London (if there is something worth that name) is outmaneuvred at every stage. Not surprising as it is composed of superannuated 'worthies'. Decisive action a la De Gaulle would stop the interventionists on the Continent dead in their tracks. What would happen if anyone would want to dismantle the EU agricultural subidy gravy train over France's wishes?

Tobin Tax: Political Caste in Germany wants your blood!

Norbert Lammert is the current President of the German Lower House (Bundestag). Today a headline tells us that he is also 'supporting' the introduction of a financial transaction tax. While some might argue in favour of such a tax it is revealing that its supporters have mainly one common denominator: they are supporters of more state spending and indirectly in support of 'robbing Peter to pay Paul' (or pay themselves or their political clients). Particularly galling is the fact that people such as Lammert - who as far as we could find out has never held a proper job in the private sector - have the temerity to put more and more onerous taxes and 'charges' onto the shoulders of the powerless citizens. In the case of Germany one also has to say that the country has a long tradition of putting (too much) faith into regulations and top-down dirigism. Despite the economic and political success after 1945 one should not forget that this was just to compensate for the disastrous policies pursued in the decades before and as a consequence the net balance is not that encouraging. The irony is that Germans worked hard in order to deliver goods on credit to all their customers in the Eurozone who now can not repay the loans. So there is a huge bill coming due and the good standing of Germany in the credit markets is to a large extent only the reverse side of the fact that many other countries are in distress. So by necessity some markets must have low interest rates as they offer a refuge - but they are not of much higher quality. Putting another tax on business will not improve things for anyone - but it will guarantee that the German financial markets will become even more a backwater.
PS: Readers who want to support a fundamental change in political systems that allow professional politicians and lobbyist to run roughshod over the interests of citizens may want to support Dirdem - Campaign for Direct Democracy here and here