Rudloff warns against excess and hype

Hans-Joerg Rudloff, chairman of the executive board of Barclays Capital, told the Euromoney International Bond Conference on Tuesday of his concerns about the direction of the international financial system.

  • 16 Feb 2001
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"Whatever we know, whatever we discuss, whatever we talk about is basically priced into the system in one way or another," Rudloff said. "Only unexpected events can and will throw the financial system into serious trouble. The last one was in 1998 when the world financial system came within five minutes of a heart attack.

"Our financial system today may well be the most sophisticated we have ever had, but it is also the most fragile. Nothing could be more ridiculous than that in the overall macro situation pertaining in the US last year, there was a move towards a credit crunch."

Rudloff attributed this fragility in part to the greatly increased speed of communication over the last four or five years, but also to the "vulgarisation" of information.

"Everything is being hyped," Rudloff said, referring to equity analysts as "possibly the most discredited profession in the world as far as forecasting is concerned". The proliferation and ready availability of financial media, particularly on television, was another cause for concern. "We might actually talk ourselves into another recession," he said.

Rudloff was also concerned about values in the market. He welcomed what he believed would be a breaking of the link between Wall Street, Hollywood and Washington under the new US administration. He condemned excessive salaries, and a preoccupation with shareholder value at the expense of all else.

"We live in a world," he said, "where we have moved towards money profit being the only true value. We have come to the point where the average US executive earns 300 times the amount that a worker does; not an entrepreneur - no one questions the right of an entrepreneur to make lots of money - but an executive. The system has become self-serving.

"The most remarkable thing about the crash of the high-tech market is that we have not noticed a single financial institution go down from it," he added. "With Russia, they lost maybe $150bn. The loss of capitalisation in the high-tech market exceeds that, but the losses have been distributed through the population. It affected only the poor souls who had become victims of one of the purest advertising schemes I have ever seen - selling the capitalisation of the next 50 years."

Rudloff also warned against turning to emerging market debt as a safe haven from volatility in the developed markets. "The gap between the developed economies and the emerging markets is growing by the day," he said. "There are no exceptions, though some countries are growing faster than others. This growing gap will without doubt lead to a complete reworking of the model.

"Globalisation has failed," he said, "if it is to be understood as being of economic benefit on a win-win basis to both developed and developing countries. We do not need to see the economic demonstrations in Seattle and Prague to know that there is a new thought process in the world, and for once academia is ahead of banks. This will affect the value of the assets in our portfolios, though it will not hit us overnight.

"Whenever models move to excesses, those excesses are corrected."

  • 16 Feb 2001

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 31,385.40 114 7.52%
2 JPMorgan 29,232.19 105 7.00%
3 Goldman Sachs 27,645.83 55 6.62%
4 Barclays 26,090.00 67 6.25%
5 Deutsche Bank 23,883.15 74 5.72%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
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1 ING 767.18 3 9.30%
1 BNP Paribas 767.18 3 9.30%
3 UniCredit 735.89 2 8.92%
4 Santander 467.33 2 5.66%
4 SG Corporate & Investment Banking 467.33 2 5.66%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
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1 Goldman Sachs 1,607.28 5 20.37%
2 Credit Suisse 1,301.65 4 16.50%
3 UBS 970.80 3 12.31%
4 BNP Paribas 522.35 4 6.62%
5 SG Corporate & Investment Banking 444.17 3 5.63%