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Wednesday, February 6, 2013
More UK Senior Banker Resignations
John Hourican is expected to leave the bank at the end of the month, with a successor to be announced in due course Photo: Getty Images
More UK Senior Banker Resignations
Stephen: There seems to be a flurry of activity among the big banks, in the UK at least, as senior key players continue to leave the upper ‘echelons’ of banking as bankers’ big bonuses continue to be disputed and/or waived (or are they simply being withheld?).
Here are just three departure and bonus-related stories. It’s the comments posted by readers of these stories that tell the real story. To read these, click through via the links at the very end of this post.
Story 1: Royal Bank of Scotland (RBS) Investment Chief to Resign and Waive £4m Bonus
By Helia Ebrahimi, and Harry Wilson, The Telegraph, UK – February 6, 2013
The head of Royal Bank of Scotland’s investment banking arm is set to give up a bonus pot worth £4m as he resigns from the lender over its involvement in Libor-rigging.
John Hourican, chief executive of markets and international banking, will leave the bank with the minimum pay-off to which he is entitled – a year’s basic salary of £700,000 – as he becomes the most senior executive at the taxpayer-backed lender to leave his job in the wake of the rate-rigging scandal.
Mr Hourican’s departure is expected to be announced to RBS staff as the bank publishes details of a settlement of around £400m over accusations it manipulated key global borrowing rates between 2005 and 2010. It is not known whether the bank will admit any liability.
The Irish banker is expected to forgo share awards worth £4m as part of a series of moves by the bank intended to defuse public anger, that will also see about £250m deducted from RBS’s bonus pool.
Friends of Mr Hourican expressed anger at his departure, pointing out that he was not in charge of the investment banking business for much of the time Libor-rigging was going on.
“George Osborne has played the part of a school room bully which will hurt the taxpayer in the end,” said one source at the bank. He added: “John slaved every day for this company. He is taking the fall. But he will leave with his head held high.”
Mr Hourican is expected to leave the bank at the end of the month, with a successor to be announced in due course. However, his division has been targeted for further shrinkage, despite already being more than halved in size.
Chief executive Stephen Hester and chairman Sir Philip Hampton are expected to hold a meeting on Wednesday afternoon to discuss the scandal. Mr Hester has already said he will not be taking a bonus himself for 2012 in the wake of last year’s IT disaster that saw some customers lose access to their money for several weeks.
In an email to staff on Tuesday night, Mr Hester apologised for the speculation surrounding the Libor settlement announcement, and said he and Sir Philip would not be “ducking the difficult questions”. He added: “We will also ensure that wrongdoers have been punished.”
RBS’s expected admission that it was involved in Libor-rigging will make it the second British bank to settle with the US and UK authorities after Barclays paid £290m in fines last June. HSBC and Lloyds Banking Group are also being investigated as part of the probe.
Officials from the Department of Justice and the Commodity Futures Trading Commission in the US, as well as the Financial Services Authority in London have been investigating RBS, along with more than a dozen other major financial institutions as part of a global into the conspiracy to manipulate rates for profit.
The Serious Fraud Office last year arrested three individuals over their alleged involvement in Libor-rigging, including Tom Hayes, a former trader for UBS and Citigroup. The SFO has said it hopes to bring criminal charges against those found to be involved in rate manipulation.
One source close to the investigation said that Wednesday’s settlement would include details of what are thought to be highly embarrassing emails sent by RBS staff implicated in the scandal.
Last month, senior Barclays executives, including investment banking chief Rich Ricci and finance director Chris Lucas, were identified on a “shortlist” of 25 names by regulators looking at Libor manipulation. The bankers names were released after a London court turned down an attempt by some of the individuals to remain anonymous in case being brought against Barclays. The judge in the case said: “The cat is out of the bag. It wouldn’t take a rocket scientist to work out who they are.”
Business Secretary Vince Cable will claim on Wednesday that any hopes of a privatisation of RBS “now looks a distant dream, unless at an unacceptable loss”. He will urge the Chancellor to consider more radical measures to get the bank off the Government’s hands. Mr Cable believes the Government should launch a giveaway of RBS securities that would allow voters to share in the upside of the bank’s share price above a pre-defined floor price.
Jim O’Neill came up with the BRIC acronym in 2001 Photo: Clara Molden
Story 2: Goldman Sachs Asset Management Chairman Jim O’Neill to Retire
By Philip Aldrick, The Telegraph, UK – February 5, 2013
Jim O’Neill, the Goldman Sachs economist who came up with the BRIC acronym in 2001 and foresaw the growth of the emerging markets, is retiring from the Wall Street bank later this year.
In a personal statement, chief executive Lloyd Blankfein and president Gary Cohn said he had made the decision after “nearly 20 years of outstanding service”. The announcement came as a surprise and no mention was made of his future plans.
Mr O’Neill, 55, is best known for coining the term BRIC in 2001 to describe how the emerging markets of Brazil, Russia, India and China would challenge the West’s economic dominance. It was a foresight that Mr Blankfein and Mr Cohn described as a “revolutionary economic trend”.
“Jim’s BRIC thesis has challenged conventional thinking about emerging markets and, as a result, has had a significant economic and social impact,” they added.
The son of a postman, he grew up in Gatley in Manchester before studying geography and economics at Sheffield University. After brief stints at Swiss Bank and Bank of America, he joined Goldman in 1995 as a partner. There, he rose to the very top, becoming its chief economist before being made chairman of Goldman Sachs Asset Management (GSAM) three years ago – a role created specifically for Mr O’Neill.
A die-hard Manchester United fan, he tried to put together a consortium of fellow supporters to take over the club in 2010. The “Red Knights” bid ultimately failed, but it catapulted him into the general public’s consciousness. Last year, he was talked about as a potential candidate to take over as Governor of the Bank of England.
More recently, he has emerged as an optimist about the economic outlook, writing last month about the “reasons for the world economy to be cheerful in 2013”. However, he has been critical of UK policy, saying in January that the contraction in GDP in the last quarter of 2012 showed that “policy has been on the wrong path”.
He is not expected to be replaced as chairman of the investment bank’s asset management arm, which will continue to be led by co-heads Tim O’Neil and Eric Lane.
Mr Blankfein and Mr Cohn said that, at GSAM, he had “strengthened our research discipline and enhanced communication among investment professionals across asset classes”. They added: “We wish Jim and his family all the best in the years ahead.”
Story 3: Barclays’ Former Pay Chief Alison Carnwath Argued Against Bob Diamond Bonus
By James Moore, The Independent – January 30, 2013
Barclays former pay chief today said she had called for no bonus to be paid to the beleaguered bank’s previous chief executive Bob Diamond and described some bankers’ pay as “obscene”.
Alison Carnwath told the Parliamentary Commission on Banking Standards that she was ultimately over-ruled by the remainder of the board, which followed the recommendation of former chairman Marcus Agius to pay Mr Diamond his millions in 2011.
She described herself as “amazed” at Mr Agius’ view that Mr Diamond deserved a bonus for a year in which Mr Diamond himself had described performance as “unacceptable”.
Both Mr Agius and Mr Diamond quit their jobs in the wake of the Libor interest rate fixing scandal that cost Barclays £290m in fines to regulators on both sides of the Atlantic.
Ms Carnwath, who was chairman of Barclays remuneration committee until last summer when she resigned for personal reasons, also said she felt Mr Diamond “over-paid” colleagues in his investment bank in a misguided attempt to secure their loyalty.
“Bod Diamond had always enjoyed a generous package. I really believe he thought he found loyalty in people around him by paying them very well, in my view, more than he needed,” she told members of the Commission.
Ms Carnwath, herself a former investment banker, also rounded on what she saw as a “culture of entitlement” that has emerged in banking. “This has resulted in the fear of losing good people, obscene levels of award in a minority of cases and excessive reward in many cases for the investment banking community.”
Mr Diamond was awarded a £2.7m annual bonus for 2011 despite the bank missing his own targets although that is only one part of his package which has been put at close to £20m for that year.
More then a third of shareholders voted against the company’s remuneration report and more than a fifth voted against Ms Carnwath’s re-election, as she carried the can for the payment.
But it subsequently emerged that she alone had objected to Mr Diamond’s deal.
She publicly confirmed that before the Commission, in an unusual display of candour by a non executive director. Such people only rarely put their heads above the parapet despite their role in overseeing executives on behalf of shareholders.
Explaining the decision to pay Mr Diamond, Ms Carnwath said: “It is my belief that a lot of people felt that Mr Diamond needed to have this bonus, it was important to him… He needed recognition in this sort of way”.
She said Mr Diamond had proved himself to be “very talented” at building up Barclays’ profitable investment banking business but “we were talking about a bonus for his role as CEO going forward. It was his first year as ceo and I just didn’t think it was appropriate”.
Ms Carnwath said she felt there were some Barclays directors who were “sympathetic to my point of view” but said that they “generally went with the chairman (Mr Agius).”
She still serves as a director of a number of companies including property giant Land Securities, which she chairs.
Committee members later rounded on Sir John Sunderland, the current chair of Barclays remuneration committee, who insisted that Mr Diamond had deserved to be paid something.
And they questioned whether the bank could truly say it had reformed its culture, and the message that might be sent out if Mr Diamond’s successor Antony Jenkins were to be paid a seven figure bonus.
He could be due that despite being in the top job for only a matter months.
Earlier former chancellor Lord Lawson had some sharp exchanges with Carol Arrowsmith, who advises on boardroom pay for Deloitte, the City consultant.
They came after he described remuneration consultants as a profession that “make prostitutes thoroughly respectable”.
To read each newspaper’s readers’ comments head here: