Rebuilding investment banking: the work that has to be done

Toby Fildes met with some of the leading figures in global capital markets in December and asked them about their hopes and fears for markets and products in 2010 and for their views on regulation, tax, pay and what their industry needs to do to regain the the trust of politicians and the public. Participants in the discussion are Alex Wilmot-Sitwell, co-chief executive of UBS Investment Bank, Tom Montag, president of global banking and markets at Bank of America Merrill Lynch, and Alain Papiasse, global head of corporate and investment banking at BNP Paribas.

  • 13 Jan 2010
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EUROWEEK: Are you more confident going into 2010 than you were entering 2009?

Wilmot-Sitwell, UBS:
Yes, for a number of reasons. The outlook for the business is broadly looking more encouraging although I’m cautious about my optimism. I’m not suggesting that 2010 is going to be an easy year, or a year that is going to be anything like the years that we saw immediately pre-crisis. But in the context of 2008/09, the outlook is more encouraging, and for us in particular at UBS, we go into 2010 in a stronger position, vis-à-vis our strategy, our talent as key position-holders, and our momentum.

Montag, Bank of America Merrill Lynch: It’s kind of hard not to be. I always try to think back to what it was like around the holidays of December 2008. Clearly, we were trying to close the transaction. We had a very bad last quarter, as did everybody, but ours was especially bad.

I am much more positive now than I was then because the market has rebounded. We’ve had a big run up on asset prices and the prospects for the industry are a lot different now. Now it’s more about what will the economy do, what shape will regulations have, how will the markets change, for example how will the derivative markets be affected — all those things are still to be played out. So there are lots of questions up in the air about ultimately what 2010 is going to look like. It’s a different set of thoughts although I don’t have the same kind of angst that we all had at the end of December 2008.

Papiasse, BNP Paribas: There are certainly more reasons to feel confident going into 2010, although some areas of the economy are still clearly fragile. At BNP
Paribas we are quietly confident that with the integration of Fortis and our measured organic growth in CIB, we are very well positioned for

EUROWEEK: There’s more clarity, that’s for sure. Revenues in fixed income across the board, across most shops, have been very strong. Are they sustainable?

Papiasse, BNP Paribas: There was a spike in fixed income and capital markets activity in the
first half of 2009, which has since normalised. That said, our balanced
CIB business model means that we enjoyed strong profitability over the whole year. For example in Q3, a small decline in fixed income revenues was offset by revenues in other areas, such as financing and
equities and advisory.

Montag, Bank of America Merrill Lynch: I’ve been thinking about that a lot. Historically, whenever you have a great year, you always ask whether it is sustainable. The fact is you have had the advantage of risk premiums being higher, competition being less and asset prices rallying — a unique set of circumstances. I don’t think risk premiums have ever been as wide, the competition narrowed, and so it’s hard to imagine conditions are going to get a lot better than they were in fixed income.

But from the perspective of the market at large, can the fee pool grow or can the trading numbers be better than they were? It’s hard to imagine it being a lot better.

Wilmot-Sitwell, UBS: For us, of course, they haven’t been because we’ve continued to work through the legacy positions and legacy hangover. But the consequences of the crisis held us back considerably last year.

EUROWEEK: Do you think of it as a missed opportunity? A lot of banks made a lot of money, didn’t they, because of the dislocation of the spreads?

Wilmot-Sitwell, UBS: I would not describe it as a missed opportunity, because it was consciously missed. We didn’t have the risk appetite, the capabilities or the strategy that was in place through the first half of last year, which allowed us to participate in the same way that others did in the extraordinary credit markets and other fixed income markets that we saw in 2009. You could say it was a missed opportunity, but a missed opportunity implies that we were there but missed it. But unfortunately, we weren’t there.

EUROWEEK: A missed opportunity because those spreads will not be there in 2010?

Wilmot-Sitwell, UBS: 2010 is not going to be like shooting fish in a barrel, because you’re not going to get free government money to put into the markets, with spreads compressing at a rate that hasn’t been seen in decades.

EUROWEEK: Have you been surprised at how quickly markets have come back?

Montag, Bank of America Merrill Lynch: Not really because it just went down so much.

Wilmot-Sitwell, UBS: It was a point of time in business and history books will be written about the first half of 2009, in terms of the extraordinary market environment. But we’re now into a much more normalised market environment.

EUROWEEK: Have markets — equity or debt — got ahead of themselves?

Papiasse, BNP Paribas: With the credit channel of monetary policy blocked, the asset price channel
is more than usually important as a transmission mechanism to pull the
global economy up. It is desirable that asset prices have advanced — they
had priced in too much bad news earlier in the year and nobody wanted that
to continue.

But no one wants a bubble either. I do not believe that we
are in a bubble, but we all have to be careful that we do not create
bubbles in the global economy. I believe that means monetary authorities throughout the world have to look to their own policy to avoid that.

Wilmot-Sitwell, UBS: I think equity markets have certainly run ahead of the underlying fundamental performance of the economy. I think it is a general observation.

Montag, Bank of America Merrill Lynch: No. While they have come back incredibly fast they are at understandable levels. If you look at high yield spreads, they’ve come back a lot but it isn’t like they are at historical highs.

EUROWEEK: So you feel comfortable where they are?

Montag, Bank of America Merrill Lynch: Yes. Although as a firm we don’t have as much risk in the credit space as we had before, the risk return is as good as it was before. We certainly don’t feel that the market is poised for any kind of move in the opposite direction.

EUROWEEK: Although they are always very forward-looking, aren’t they?

Wilmot-Sitwell, UBS: Yes, they are and the markets are likely to start the year in a reasonably positive way. If you looked at what volumes did through the fourth quarter, in the equity markets volumes fell considerably as investors increasingly moved to the sidelines. And that’s partly to protect the strong performance that institutions, hedge funds and other market participants had through the first three-quarters of 2009. Not wanting to put that performance at risk the year therefore ended early in some respects from a market point of view. On the other hand that probably means we should see reasonably strong pick-up in volumes through the beginning of 2010 as those market participants come back to work.

EUROWEEK: Do you think high yield has come back too quickly and what has driven that kind of behaviour in that market?

Wilmot-Sitwell, UBS: Yes — it’s lack of product. A lot of money and not much product.

EUROWEEK: Implying that perhaps investors hadn’t thought as clearly as they should have done?

Wilmot-Sitwell, UBS: You’ve seen a chase for yield and that has driven the high yield market up too aggressively too quickly. I think that’s a market that will correct.

Papiasse, BNP Paribas: High yield was the best performing asset class last year, although the
recent rally seems to have lost steam. The main reason for the tightening of HY spreads has been a sharp reduction in refinancing risk. Thanks to the re-opening of the primary market, from October 2008 to September 2009 the total amount of debt due by the issuers in the Crossover S10 has fallen to about Eu200bn from about Eu260bn, with
2010 and 2011 maturities declining by more than 50%. As a result, the default cycle for European high yield companies turned out to be more favourable than previously anticipated. Defaults will peak by the end of the year, according to the rating agencies. November saw the lowest number of global defaults in a year, and according to Moody’s the 12-month trailing default rate will drop sharply from here to about 4%
in a year’s time. So while the rally in HY has been fast and furious, we are not at ‘bubble’
valuation levels yet, and we should expect more tightening in 2010 — although at a slower pace and associated with more volatility.

EUROWEEK: Tom, do you believe market levels match the fundamentals?

Montag, Bank of America Merrill Lynch: It matches the fundamentals. It’s always a forward looking market — it’s trying to anticipate what’s going to happen after the recession is over.

A lot of companies had to recapitalise themselves and investors were willing to support that. The question for us is how much leverage will the market allow in different companies, and what kind of growth and returns the market will expect.

EUROWEEK: There are government deficits everywhere you look, and they all need to be financed. There are huge amounts of debt now on government balance sheets for various reasons. Isn’t that dangerous? It sounds dangerous.

Montag, Bank of America Merrill Lynch: In and of itself it could be dangerous, I’d have to look at a specific situation — what the personal savings rate is and what the total debt burden is and what the debt rate is.

I lived in Japan for a long time where you had (and have) a large deficit. But with interest rates really low you can afford to have a lot of debt because the cost of that debt isn’t very high. It’s very specific to countries and their situations. Of course there are always advantages to having less debt.

EUROWEEK: Are we heading for a sovereign debt crisis this year?

Wilmot-Sitwell, UBS: Oh, I hope not. I don’t think we are but there is more risk of a sovereign debt crisis looking forward than we’ve had for a very long time. Whether you look at Greece, Ireland, or quite frankly the UK, it’s probably the big risk for this year. It’s worth pointing out, however, that if Greece and Ireland were not in the euro, then, frankly, the risks would have been much greater.

The challenge for the UK, other than the obvious, is going to be that this is all taking place in an election year, which is not ideal because at some point in the first quarter of this year we’re going to go into a period of political stagnation. Luckily, in the UK the election period is a short one. It doesn’t drag on for months but it is going to be a distraction.

Papiasse, BNP Paribas: Advanced economies failed to reduce deficits enough during the boom years. Many incurred additional costs from bailing out banking systems, age-related spending is due to rise. Most advanced countries went into the
crisis with already too high debt to income ratios. This is a challenge but it need not become a crisis. The main problem for budgets today is that
economic activity will remain significantly below previously expected levels for a long time. We have to adjust and adapt but not too quickly or we will fall back into recession.

A sovereign debt crisis is a risk but if credible and detailed plans for
long term fiscal consolidation are drawn up then it is avoidable. There are
significant challenges ahead but it would be wrong to over-dramatise them.

EUROWEEK: The first global recession appears to be over. What shape will the recovery be?

Papiasse, BNP Paribas: The recovery is going to be uneven across regions and sectors.

The manufacturing industry worldwide is recovering quickly. But the level of output in the advanced economies remains significantly lower than before the Lehman [collapse], whereas emerging markets have done much better. It is likely that emerging markets will continue to outperform. The US has had a
massive labour shakeout and is therefore much closer to seeing jobs
being added than Europe or Japan. Corporate finances overall are in much better shape in the US than in Europe so growth should be better there.

Nonetheless, deleveraging, swings in inventories and excess capacity
should make for uneven growth in the US in 2010. Europe and Japan will
have much less from domestic demand and will lag.

Overall, we should see emerging markets — especially Asia ex-Japan — grow quickest, followed by North America and with Japan and Europe lagging.

Wilmot-Sitwell, UBS: The recovery will look like the Nike symbol — it’s the long, slow swoosh.

EUROWEEK: Would you apply that to Europe as well as the US?

Wilmot-Sitwell, UBS: It’s not going to track itself perfectly. Asia is going to be stronger, the US is going to be less strong than Asia but stronger than Europe. Europe’s going to be the weakest but within Europe I suspect you’ll see better recovery in Germany than you will in the UK. As in all these things, once you look under the bonnet there are different bits of the engine which are going to behave slightly differently.

Montag, Bank of America Merrill Lynch: The recovery is going to be slow. In the US it’s going to be a slow and steady grind back and in Europe you’re going to see the same thing, perhaps even slower.

While there has been a recovery of sorts in the job market, you still see plenty of evidence that people’s behaviour has changed. You see it in how consumers are spending, how they use debit cards rather than credit cards, what their spending will be during the holiday season, all those types of things.

Do I think there’s going to be a double dip, per se? No. But everybody worries about the liquidity that’s been pumped into the system and where it has gone and whether it has been useful or whether it has helped create an asset bubble occurring some place else. Those kinds of things are always in the back of your mind whenever liquidity has been pumped in to provide support to the financial system.

EUROWEEK: There’s been a lot of noise about Greece recently, having been downgraded to BBB+ by S&P, and having to raise a lot of money to finance its deficit. It’s on people’s worry lists.

Montag, Bank of America Merrill Lynch: Yes. Listen, it is a worry but in their case they’re fortunate to be part of the euro and have all the support that it provides them. It’s like California in the US and the issues they’ve had. But the economy is going to grow and conditions will be getting better and short term rates will remain relatively low.

EUROWEEK: Will you be adding or reducing the number of key clients you plan to cover this year?

Papiasse, BNP Paribas: In 2010 we will be looking to optimise our client base and to deepen our position as a core bank to these clients. In order to do this, we are rolling out a new ‘client-centric’ coverage model, increasingly based on geographies and client segmentation.

In the US corporate space, for example, we are enjoying growing success with new and existing clients. We are also reaching out to a growing number of institutional
investors worldwide.

Montag, Bank of America Merrill Lynch: We intend to expand our coverage footprint in Europe and in Asia. We’ll be hiring more people, both on the banking side and the sales and trading side where we want to have broader and deeper coverage.

On the corporate side, we’re going to do that by trying to be both a corporate and investment banker to more companies around the world.

Wilmot-Sitwell, UBS: I don’t think we see any fundamental change to our coverage footprint. We’re certainly going to be more focused on those clients where we have the strongest alignment of interests. We’re clearly going to focus on those clients where we see the best long-term returns but there isn’t a fundamental change in our coverage footprint that we’re expecting or planning for.

EUROWEEK: Will you be using balance sheet more in the coming year?

Wilmot-Sitwell, UBS: It’s the same answer. Yes, of course we’ll use our balance sheet because we have trading businesses that need balance sheet. We have client segments that need balance sheet. We’ve got a very big prime brokerage business. We’ve also got quite a big loan book, actually. We have a fairly significant franchise-lending book, which is clearly focused on our corporate clients. What we don’t have or haven’t had is one of the biggest leveraged loan businesses. Leverage finance is certainly an important part of our overall strategy, but in a very focused way. And what does that mean? That means that we will be focused on those clients and those deals where we can see an above-cost-of-capital return on our capital, and an ability to distribute risk effectively.

Montag, Bank of America Merrill Lynch: Yes, it will involve lending but it will also involve treasury, trade finance products and everything else that we offer in corporate banking.

So it isn’t just lending to get the debt capital markets business, it’s really a fulsome corporate banking relationship, be it cash management, trade finance, all the things that a traditional bank does for a client.

EUROWEEK: Is the balance sheet, as a resource, more important now than it was a year ago?

Papiasse, BNP Paribas: Yes, definitely. And we have significant capacity to lend, especially following our acquisition of Fortis. We are focusing on using our
balance sheet to increase our focus on our strategic markets, such as
Europe, the US and Asia, as well as building out our product innovation,
distribution and advisory capabilities.

Wilmot-Sitwell, UBS: It’s more important than it was two years ago. I don’t think it’s necessarily more important than it was a year ago when we had the biggest liquidity crisis that the world has ever seen, when balance sheets had unbelievable value. To quote one of our private equity clients who said to me the other day, three years ago a balance sheet had no value to us whatsoever because we could get it from anyone. Today it clearly has real value. So yes, balance sheet is more valuable for our clients than it was.

But balance sheet and capital is very finite, and is an increasingly scarce resource, and therefore how it is priced and the returns that one gets from it are going to be absolutely critical. And what you cannot do is fall into the trap of chasing market share for the sake of it, or being all things to all people, because that strategy won’t work.

Montag, Bank of America Merrill Lynch: It’s really more of a customer question but based on my conversations with clients of this bank, people recognise the value of having a big, strong, well capitalised bank that can provide financing through difficult times.

EUROWEEK: With the regulator threatening high capital charges on certain trading activities, are investment banks going to lose people or business to hedge funds and other players like that?

Wilmot-Sitwell, UBS: The answer is yes, we will lose people but I don’t think that’s a new trend.

EUROWEEK: But damagingly so?

Wilmot-Sitwell, UBS: No. I don’t believe that we are not going to be able to attract and retain very strong talent. Banks, and investment banks in particular, have always been a nursery or a training ground for people who go off and do more entrepreneurial things, or who populate a wide range of businesses and industries. And I don’t think there’s anything wrong with that. I think, actually, it populates a future client base who are going to continue to give us business.

Papiasse, BNP Paribas: On paper, the risk of competitive distortion between capital regulated
banks and other players such as hedge funds or non-bank players may exist. But my conviction is that this risk should remain limited, at least for
most CIB players.

For BNP Paribas that has one of the lowest proportion of market risk-weighted asset versus its competitors, higher capital charges on certain trading activities will not dramatically impact the bank and probably less than many of our peers, as most analysts anticipate today.

CIB has the capital flexibility required to face this new environment. Based on our latest discussions with regulators, the core tier one impact for BNP Paribas of these new market risk capital regulations will remain manageable. We need, however, to remain vigilant on the persistence of a level playing field among all competitors. In particular, we need to ensure that there will be no significant mismatch in the timing of introduction of these new regulations between Europe and the

Montag, Bank of America Merrill Lynch: Our business shifts because of rules and regulations that change. I don’t imagine people will leave just because of regulation changes; it would be our reaction to that regulation and what it means to our business that might cause them to seek other opportunities.

EUROWEEK: Do you expect to see bankers migrating from highly-taxed jurisdictions, as London threatens to be?

Montag, Bank of America Merrill Lynch: Well, naturally, over time if taxes are much higher in London to do business than other places, then you will invariably see people going where it’s less costly to do business. If they said they’re going to have a 50% tax forever on what you are paid, I think you clearly would see companies adjusting their presence downward.

Wilmot-Sitwell, UBS: Yes, it’s quite possible. There’s a much greater risk of that than there has been for many years.

Papiasse, BNP Paribas: It is difficult to make predictions in this area and London is one of the core hubs of international finance. But it would be fair to say that the higher taxation levels are detrimental to London’s appeal as a financial centre.

EUROWEEK: Is taxing bankers’ bonuses, like the UK has done and France
intends to, fair?

Montag, Bank of America Merrill Lynch: Governments can do what they like with taxes — that’s their prerogative.

These are such global businesses. People can be in a lot of different places and your competitors take all shapes and forms. They aren’t just banks, they are hedge funds, they are private equity, they are consulting firms, they are money managers. So in that sense it’s not fair because large parts of your business are competing with people that aren’t impacted by these changes.

You need to know the rules and how it’s going to work, so then you can adapt to them. That’s fine. But when the rules change so dramatically suddenly it’s difficult to treat your employees fairly and maximise shareholder value at the same time.

Papiasse, BNP Paribas: Although I would rather not comment on whether or not I think this is
fair, I would like to stress that regulation related to investment banks
needs to be applied consistently across companies and geographical borders. If some countries behave differently to others, then this is not creating a level playing field and it distorts competition.

EUROWEEK: Have banks lost the initiative to be able to protest about what’s being done by governments or regulators?

Montag, Bank of America Merrill Lynch: We can certainly shape the future by how we transact our business, what kind of products we sell and create, how we sell and create those products and what kind of transactions we support. We can shape it over time but over the short term it’s very difficult to affect how the public thinks.

Papiasse, BNP Paribas: Banks and their
professional organisations are key contributors in the current debate on
regulation and tax issues.

The world has definitely changed after the
financial crisis we have been through and we want to ensure that such a
crisis is ruled out in the future while the bank industry can continue to play its part in supporting the economy worldwide.

Wilmot-Sitwell, UBS: For the time being the banks are not in a strong position.

EUROWEEK: Then how can they regain that initiative?

Wilmot-Sitwell, UBS: By returning to a profitable business model that is inherently less volatile. By proving that the banking industry can, as it has for the vast majority of history, add value to the global economy. The global economy cannot function without a strong and vibrant banking industry, and it is important that we revert to being that strong contributor as an industry, which we always have been to the global economy.

EUROWEEK: How can the banking profession regain the public’s trust and

Papiasse, BNP Paribas: Banker bashing has been a constant in society and it will
not end overnight. But it is important for bank professionals to
prove everyday the social utility of the banking industry in helping individuals, corporates and institutions financing their projects and managing their assets and their risks. This is the true essence of
banking and if we all do this consistently and responsibly, we will have
earned the public’s trust and backing.

Montag, Bank of America Merrill Lynch: By being trustworthy. That’s not meant to be a flip answer but by behaving and taking risk in a prudent way, by not getting too cute in what we do.

EUROWEEK: But it is that kind of place though — it’s so entrepreneurial that it ends up being cute with itself. Will that ever change?

Montag, Bank of America Merrill Lynch: You’re right but it can learn to be more prudent about risks and how to sell those assets. I believe we can do that.

EUROWEEK: What are your main grounds for optimism in 2010?

Papiasse, BNP Paribas: Deleveraging, the focus of central banks on appropriately timed exit
policies and the lessons from the last crisis, all reduce the chances of potentially destructive bubbles in the near future. However, central banks
will need to be mindful of the need to set monetary policy appropriately and in a number of emerging markets bubbles are a possibility because monetary policy settings — partly for exchange rate management reasons —
look very soft while credit and monetary growth has been very strong.

Wilmot-Sitwell, UBS: We’re seeing a pickup in the pipeline for capital markets activity, particularly in equity capital markets and primary business.


Wilmot-Sitwell, UBS: We’re seeing a slow, gradual pickup in M&A, not a rampant pickup by any means. It is definitely looking better but off of a very low base.

EUROWEEK: Are the financing tools there to support more M&A?

Wilmot-Sitwell, UBS: Yes. As long as there’s a clear takeout strategy immediately afterwards. We’re back to a more normalised run-rate of activity that one saw in years prior to the excess years of 2005, 2006 and early 2007, in an economic environment which is still very fragile.

EUROWEEK: What are your big bets for 2010 in terms of products or geography? You mentioned Asia.

Wilmot-Sitwell, UBS: Asia is clearly a very important region and business for us although I’m not sure that 2010 is going to be the year for making big bets.

There’s still a lot of re-equitisation in the market, in the insurance and real estate sectors, to name two. There’s still going to be a lot of bank capital work in terms of the changes the bank balance sheets are going to go through. To a certain extent it will mean more capital but it’s also going to be different capital, and a change in the capital structure of banks as the banks respond to Basel II. There’s going to be a lot of sovereign financing work over the course of the next year or two and emerging markets will continue to remain very active.

EUROWEEK: Tom, what’s your big bet for 2010?

Montag, Bank of America Merrill Lynch: We don’t bet by year on countries or products. But foreign exchange is a classic example of a business that we’re focused on. By expanding our global corporate banking capabilities, combined with the international strengths that Merrill Lynch brought, we think we can do a lot better in foreign exchange. We think the commodity business is another business that’s growing. Marrying the relationships the bank has with our sales and trading effort in commodities is a big focus for us. So we’re trying to do that and learn how to do it in a better way.

EUROWEEK: A lot of people are suggesting Russia is one that’s going to grow very quickly especially capital markets-type business.

Montag, Bank of America Merrill Lynch: Russia, along with others such as Brazil, India and China, is clearly a country you need to be in and be a thought leader. People are interested in what’s going on there and the opportunities that are there to provide alpha to our clients. We’re trying to build our presence in Russia and getting a banking license which we are working on is an essential part of that.

EUROWEEK: In terms of capital markets products, what are you expecting big things from in 2010? For example, many predict that it will be a big year for IPOs, while some expect more from the corporate bond market.

Montag, Bank of America Merrill Lynch: I don’t know about corporate bonds because that market has already had a phenomenal 12 months. But you will see more and more IPOs. For example, many investment firms such as private equity will want to get out of sponsor groups and use the equity market to facilitate that. We will also see more sponsor investing activity in 2010. We feel particularly well positioned for that. But if I had to choose which one of equity and debt was to see more growth over the year I would have to say equity, although debt will also grow.

EUROWEEK: Alain: where is the next bubble? Corporate bonds? Sovereign debt? The
new wave of contingent capital?

Papiasse, BNP Paribas: There is naturally a lot of concern about the emergence of further bubbles
in the global economy. It is not clear that the world is presently suffering from widespread bubbles. Certainly asset prices advanced considerably last year. But given that markets were pricing in a much
higher risk of a much more pessimistic outcome than now seems likely, that is welcome and natural, especially as risk-free rates are exceptionally low.

However, we cannot be complacent and it is important that central banks, regulators and financial institutions ensure that risk does not become underpriced.

I have no doubt that a wide range of financial institutions are paying considerably more attention to risk management than a couple of years ago. The taste for complex instruments, which were such a factor in
the crisis, has clearly stepped down significantly — people at least appreciate better than before the risks they are taking.

Montag, Bank of America Merrill Lynch: The asset values one tends to get concerned about are now more in the Asian markets. Not that I think there’s a bubble there now, but you worry about it because the growth has come back. For example, Hong Kong real estate is getting back to where it was before the crisis. Not that that in itself is a bubble but it’s reflective of the value of assets in the region.

EUROWEEK: Which products do you worry about? For example, do you expect much leveraged finance?

Montag, Bank of America Merrill Lynch: It will come back. Since the beginning of time people have tried to use leverage to buy companies and that is not going to change.

EUROWEEK: Alex, what are the three big risks specifically for your business in 2010?

Wilmot-Sitwell, UBS: Non-delivery of our plan is probably the biggest. Let’s put it this way, if you turn the question the other way round, the most important challenge is delivery, delivery, delivery.

EUROWEEK: Tom, if you had one question or point to raise with Tim Geithner, what would it be?

Montag, Bank of America Merrill Lynch: The one thing that I would be most interested in is if he could tell me today the way they’re going to regulate institutions. Will Glass-Steagall be back or not? Will there be the pressure to break institutions up? Will we have a global regulator or not? And I would also have to ask him what capital will banks be required to have, for what kind of assets. That is going to be absolutely key.

EUROWEEK: And if you could go back in time and you got on the phone to Hank Paulson on the Friday before Lehman went under, would you be telling him not to let it go down, based on the experience of the last 15 months?

Montag, Bank of America Merrill Lynch: No. But they do need to be able to have a system in place whereby they can orderly unwind a financial institution. That’s something that they [should] build out of this situation and learn from Lehman’s collapse.

Wilmot-Sitwell, UBS: History would have to suggest that it increased the systemic risk and crisis by allowing Lehman to fold. I’d find some way of an orderly wind-down or transfer of the business to a number of different hands.

EUROWEEK: In mid-December, President Obama warned again about "fat cat bankers" and reminded them of their responsibility to spur economic activity. But is there now a danger of pushing the banking industry too far with too many regulations and punishment?

Montag, Bank of America Merrill Lynch: Any time you try to guide or direct behaviour in a new way you risk side effects — there are often unintended consequences of good deeds. Take the housing crisis, which was exacerbated by things the government wanted banks to do in lending in the residential mortgage market around the country.

That said, the reason the banking industry is more tightly regulated and the reason it is part of the Federal Reserve System is its responsibility to provide lending in the US, lending to US counterparties and helping to grow the economy. That is part of the reason we are here.

EUROWEEK: Was it another call to arms to the banking industry?

Montag, Bank of America Merrill Lynch: He wasn’t just speaking to the banking community, he was speaking to the whole country about what he expects from us and what he’s trying to get from the banks in return for the support that the government provided to the banking industry which is part of the reason that Federal Reserve exists, the lender of last resort. I saw it as a reminder to keep us focused, that it’s not just the employee and it’s not just the shareholder, it’s also the economy.

EUROWEEK: He said there was still, in certain parts of the industry, a disconnect between bankers and the rest of the country. Would you say that’s still the case?

Montag, Bank of America Merrill Lynch: Obama has appeared to like working with the industry to get things to happen all the way from the beginning of his term — he’s had the meetings with senior leaders and tried to work with them to do the right thing. But is there still a gap between Wall Street and Main Street? The answer is yes.

  • 13 Jan 2010

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 17 Oct 2016
1 JPMorgan 310,048.18 1328 8.75%
2 Citi 285,934.48 1059 8.07%
3 Barclays 258,057.88 833 7.29%
4 Bank of America Merrill Lynch 248,459.06 911 7.01%
5 HSBC 218,245.86 884 6.16%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 JPMorgan 29,669.98 55 6.95%
2 UniCredit 28,692.62 136 6.73%
3 BNP Paribas 28,431.90 139 6.66%
4 HSBC 22,935.49 112 5.38%
5 ING 18,645.88 118 4.37%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 JPMorgan 14,593.71 79 10.38%
2 Goldman Sachs 11,713.19 63 8.33%
3 Morgan Stanley 9,435.23 48 6.71%
4 Bank of America Merrill Lynch 9,019.27 40 6.41%
5 UBS 8,763.73 42 6.23%