Morning Coffee: Abusive Barclays trader really tried to do right thing. A paradigm shift for banking pay
The Barclays LIBOR trial is nearing its conclusion. On Monday, three ex-Barclays' staff, Jonathan Mathew, 35, Jay Merchant, 45, and Alex Pabon, 38 were found guilty of rigging LIBOR. The three men have yet to be sentenced, but the 11 year jail term meted out to ex-RBS trader Tom Hayes does not bode well. As Bloombergview noted yesterday, however, the trial has raised more questions than it's answered.
In particular, the trial has led to questions about the culpability of Barclays' senior management. While the LIBOR rigging was taking place, Bloomberg observes that Peter Johnson, the 49 year-old senior LIBOR trader who already pleaded guilty to manipulating the benchmark, seemed to be taking orders on submissions directly from head of money markets Mark Dearlove. Dearlove, in turn, appears to have been taking orders from Jerry Del Missier, then president of Barclays Capital. And Del Missier appears to have been taking orders on LIBOR from then-CEO Bob Diamond.
"Neither Del Missier nor Diamond have had to testify in court about their roles in the Libor scandal," notes Bloomberg. " - Not even as witnesses, nevermind defendants."
Johnson, meanwhile, has come out badly from the trial. It emerged that he was abusive to Mathew, then aged 23, whom he humiliated with a mini-baseball bat. However, Bloomberg notes that Johnson was actually trying to do the right thing: a transcript of a 2007 conference call showed that Johnson wanted to submit higher Libor rates, which were more accurate, but was overruled by his superiors.
Given that none of those superiors has been brought to book, the Barclays Libor trial has awkward implications for traders today: either you disobey senior staff when they issue legally dubious commands and lose your job, or you do as you're told and go to prison.
Separately, it's starting to look like Britain's decision to leave the European Union might be the straw that breaks the camel's back when it comes to banking pay. “Ever since the financial crisis, there has been a need for reshaping the spend on compensation costs,” Jon Terry, a partner at PricewaterhouseCoopers in London, told Bloomberg. “Brexit is possibly one of the biggest catalysts for the next stage of reduction.”
Standard Life, Aviva and M&G have all stopped investors withdrawing money from UK commercial property funds, but it's not 2007. (Financial Times)
The M&G, Aviva and Standard Life funds had cash positions – which can be used to meet redemption requests – of 7.7%, 9.3% and 13.1%, respectively. (Financial News)
Before Brexit, the biggest banks in the U.S., U.K., Germany, France and Italy had a combined capital shortfall of $998 billion. After Brexit, that stood at $1.163 trillion, an increase of $165 billion. (Bloomberg)
Based upon game theory, Credit Suisse analysts think the chance of Britain leaving the EU is less than 50%. (Bloomberg)
Credit Suisse is merging its fixed income and equities divisions in Asia. (Reuters)
In 2007, Lehman had a leverage (the ratio of total assets to shareholder's equity) of 31-to-1. Deutsche's leverage ratio is now 40:1. (The Street)
Mark Boland is a lesson in how to move into a senior private equity role aged 57, despite never having worked in banking. (Financial Times)
Mark Holder, who had been global co-head of electronic trading for equities at UBS, is joining Citadel. (Financial News)
RBC Capital markets hired Ed Boyce from Nomura as head of consumer and retail investment banking in Europe. (Financial News)
How banks (used to ) entertain clients: Rugby tickets, polo tickets, football tickets, Cirque du Soleil tickets. (Business Insider)
UK contender for prime minister Andrea Leadsom was really not a big thing in the City of London. (Reaction)
Blackberry Classic RIP. (Bloomberg)
City of London sealed off for a controlled explosion of a box which turned out to contain Haribo sweets. (RT)
BNP Paribas has a funzone in its Luxembourg office. (Wort)