BNP Paribas has altered the reporting line for its London-based European securitization research group so that it now reports to a banker--Ra Sharma, global head of structured credit syndicate, instead of to the head of credit strategy. Two people at Paribas and securitization analysts at competing firms confirmed the change in reporting lines.
The move is considered strange by other European ABS research heads in light of the conflict of interest issues arising from New York State Attorney General Eliot Spitzer's investigations of Merrill Lynch. Sharma says the reporting lines are "not formal" and that he is simply overseeing the research group. Previously, ABS research had reported into Alan Capper, head of credit strategy, who in turn reports to Eric Dumas, head of primary and secondary trading for high-grade corporates. Both Capper and Dumas were on holiday and could not be reached for comment.
Ingrid Blauer, Paribas' former head of securitization research left the firm last month and two people who have spoken to her, say she told them she moved on because she was unhappy with the new reporting lines. Blauer could not be reached for comment. Two people at Paribas deny that was the case and say she left for personal reasons.
A global head of securitization research at a rival firm says he is very surprised that, given Spitzer's investigations in New York, a firm would elect to have analysts report to the banking side of the business. He argues that it makes it difficult for analysts to maintain their independence and the integrity of their research. "Of course we're part of the product group, because you need to bring value to the franchise, but that's different from a hard reporting line," he says.
Another European securitization head at a rival firm adds, while investors are aware that sell-side analysts are by definition not independent entities, fixed-income analysts' roles will come under scrutiny making it advisable to avoid the appearance of impropriety. Most analysts contacted reported to their firms' research head or to an executive board member and thought Paribas' new reporting lines to be unique in the industry.