Friday, 21 September 2018

One in ten?

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SwissInvest strategist Anthony Peters says bankers have reason to be grateful to former HBOS man Peter Cummings

Anthony Peters, SwissInvest Strategist

ALTHOUGH THE TERM “decimate” is used freely by all and sundry to describe devastating damage, it actually derives from the Roman army’s practice of killing one in 10 soldiers in mutinous or cowardly army units “pour encourager les autres”.

It is now the City’s turn to be “decimated” as the defrocking of Peter Cummings, former CEO of HBOS’ Corporate Banking, demonstrates. The £500,000 fine and life-long ban from the banking industry, imposed by the Financial Services Authority, will surely not quite wipe him out financially and, as he’s quit banking, the ban is no more than a nominal penalty.

He has apparently chosen to take the hit and walk away, but the fact that it is he and not you or I who has been penalised does not make us any less guilty than it rendered the nine cowardly soldiers who were not slain brave.

Not without reason, Cummings feels let down. Not only, as he puts it, does the FSA act as prosecutor, judge, jury and executioner, but he clearly has a case that he should not be found guilty if his erstwhile boss, Andy Hornby, is not even in the dock with him.

The fact is, whether Cummings likes it or not, he is that 10th soldier. I can’t believe that his hubris in growing the bank’s balance sheet was any more or less than that of any of his superiors or lieutenants.

I must confess that, having been there, I prefer the term “hubris” to “greed”. I always got the feeling that although everyone involved loved the telephone number bonuses, they still believed that it was due reward for a job well done.

The popular image that actions were taken and trades closed simply in expectation of a fixed percentage payout from the P&L doesn’t ring true. The judgement of what was good and what was bad banking was certainly clouded, but I suspect that there was rather little reckless greed at work – at least not in the senior levels of management.

THE QUESTION I keep on coming back to is: “Where were the shareholders?”

The so-called “Shareholder Spring” that we experienced this year in which senior executives in all manner of sectors were being ritually debagged was dubbed as the great fight back by the owners of the means of production.

When it comes to closing the barn door after the horse has bolted, institutional shareholders take all the prizes. How happy they were to read annual reports from banks where cost ratios were running in the high 70s as a matter of course and where, after the first wave of the credit crisis in 2007, they occasionally ran above 100%.

Nice of Anshu Jain, co-chairman of Deutsche Bank, to declare this week that he was planning to put shareholders ahead of staff – he’s made his pile and when standing on it, it’s easy to look down – but, as I ask above, where were those shareholder before?

It was, after all, they who voted year after year to reappoint the respective boards and to accept the dividends they were being offered. Those divis were of course of magnitudes they had never seen before and they too were overtaken by hubris. Perception became reality. Now there is a howling and a wailing and a gnashing of teeth – but it doesn’t impress me.

Banking should be here to make things happen for other people. Other people are not here to make things happen for bankers.

ON THE WHOLE we should all be grateful to Peter Cummings. He, like Fred “the Shred” Goodwin, has taken all the blame while most of us, all culpable in our own little way, have been left alone.

Yes, compensation has gone to hell in a handcart, but any one of the high earners who actually believed they were worth what they were being paid should be ashamed of themselves. What’s more, if they believe that they will ever earn those numbers again, they should be fired for abject stupidity. Banking should be here to make things happen for other people. Other people are not here to make things happen for bankers.

In the 1960s, all the smartest graduates wanted to work for NASA. In the 1970s, it was the oil industry and the Seven Sisters. The 1980s were all about marketing at Unilever or Philip Morris. The 1990s were dedicated to forming dotcom companies but by the turn of the century the urge to be a banker completely took over.

I suppose they all want to be in social media now. As I have occasionally commented, when I joined banking, it was because one couldn’t get a proper job and it broadly looked better than the alternatives for the unwanted – the church or the army.

The FSA has done us all a favour: it has decided to shoot corpses. We should quietly be grateful and humbly go on our way in the happy knowledge that we have not been “decimated”.

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