ARAB TIMES, FRIDAY, SEPTEMBER 21, 2012
In this Sept 13, 2012 file caution urged on Libor reform
photo, specialist Sean
O’Brien works at his post
on the floor of the New Libor, the interest rate at the centre of an inter- lishing its recommendations for legal changes necessary for the off-exchange derivatives mar-
York Stock Exchange. national rate-rigging investigation, must not be to Libor on Sept. 28. ket to function properly.
Stocks rose after a pair of scrapped hastily and any shift to alternatives However, the prospect of changes to a Replicating Libor across derivatives would be
encouraging reports should be gradual to avoid market disruption, the benchmark used as a basis for pricing $350 tril- a very large and difficult task, he told the ISDA’s
about the US housing derivatives industry’s leading global body said. lion of products from home loans to credit cards annual conference. “Libor must continue to be
market. Home sales and Reform of the London interbank offered rate has alarmed the derivatives market, a major published.” The authorities should encourage
construction of single- is inevitable after Barclays and Royal Bank of user of the rate for its complex financial prod- banks to continue to participate in setting Libor
family homes in August Scotland (RBS) were hauled before British and ucts. in the short and medium term until a longer-
both occurred at the U.S. regulators. Barclays was fined a record Stephen O’Connor, chairman of the term solution is in place, O’Connor added.
fastest pace in more than $450 million in June for attempted manipulation International Swaps and Derivatives Libor is compiled by a panel of banks sub-
two years. (AP) of the rate and RBS is expected to be the next Association (ISDA) and managing director of mitting quotes for the interest rate at which they
bank to settle. Morgan Stanley, said on Thursday that Libor believe they could borrow from one another.
See Markets Page 46 Britain’s Financial Services Authority is pub- remained hugely relevant economically and is (RTRS)
Success attributed to long-term thinking
Family-owned firms outperform global benchmark
LONDON, Sept 20, (RTRS): With all the story of mom-and-pop shops, local widg- long-term thinking — doffing a cap more there is an inherent logic to the idea that Strategy and Thematic Research at Credit the battered financials that whacked
booms, busts, policy fixes and financial et-makers or entrepreneurial startups. to the German or continental European they are longer-term in their horizons — Suisse Private Banking, adding that a lot global indices over the period. Moreover,
turbulence of recent years, investors This universe, for example, is probably style of capitalism that a heavily market- if only to pass on a healthy business to of family businesses in Europe in partic- size does play a part, with more than 40
would have done well to keep it in the successful more for its inclusion of such driven British bias, for example. the next generation — and that they jeal- ular have more stable long-term bank percent of the firms surveyed employing
family — or family businesses at least. corporate behemoths as Volkswagen, Post mortems of the credit crash all ously guard hard-won reputations. financing as opposed to equity financing. a thousand people or more.
Even though family ownership to BMW, Samsung, Wal-Mart, Carrefour point in some way to the preceding short- Nearly half the companies surveyed in One question is whether this is just A sharp recovery or world markets and
some conjures up thoughts of cronyism, and L’Oreal. termism and myopia of company owners, a poll of the family firm universe con- some old-world bolthole for fearful the global economy over the coming
internecine feuds and succession prob- Indeed consultants McKinsey estimate executives, shareholders and investors — ducted by Credit Suisse are the more investors looking for something instinc- years, as a result, could therefore under-
lems, performance data shows that listed that a third of all companies in Wall St’s banks and financial firms most obviously weather-worn firms who are in at least tively conservative in testing times. mine the theme.
companies where families have substan- S&P 500 index and 40 percent of the 250 — that led to rash decision-making is their third or fourth generation of the But the CS index has about 21 percent “If in the next five years, if there’s a
tial shareholdings outstripped benchmark largest companies in France and search of the fastest buck at the expense same family. And most of these tend to of emerging market companies and the
big rally in the high-beta stuff — banks,
global indices over the past five years. Germany are defined as family business- of longer-term stability. stay focussed on what they do best by parallel survey also gives a more dynam-
A Credit Suisse index of 225 family- es — defined as firms where a family This so-called “quarterly capitalism”, concentrating on their core business. ic hue by showing more than 50 percent mining etc — then that would probably
dominated or influenced companies owns a significant share and can steer where horizons were little further than But, perhaps critically in a credit planning to expand into new countries. leave family businesses behind,” said
around the world, for example, has out- decisions like choice of chairman and the next three-month earnings report and crunched world, they are less leveraged Yet outperformance in such defensive O’Sullivan at Credit Suisse.
performed the broad MSCI World by CEO. outsize annual bonus payments were rife, than many of their corporate peers and times does point toward at least some “But because private indebtedness
some eight percent since August 2007 So what’s the secret of outperfor- is perhaps best illustrated in the collapse prefer internal financing or one-off strate- sectoral skew alongside a perhaps count- remains so high and deleveraging will be
despite nominal losses of about 10 per- mance? Is it all smoke and mirrors or a in the average length of US shareholding gic investments to equity or debt financ- er-intuitive bias toward corporate size likely continue to be severe for some
cent. temporal quirk related to the peculiarities to just seven months in 2007 from 2 years ing on capital markets. that may draw safety bids. time, family businesses should continue
With European small cap stocks down of the credit shock? in 1987. “This really is a distinctive model and And the family index is indeed heavily to be interesting as they tend not to be
twice as much as that over the same peri- The theme that seems to shine through Yet for all the squeamishness about one that seems to be working,” said weighted toward the likes of consumer overleveraged and have that longer-term
od, this is clearly not just a speculative all reports on the subject is longevity and vagaries family ownership and control, Michael O’Sullivan, Head of Portfolio staples and luxury goods and is light on view.”
Adoboli pleads not guilty
UBS risk limit did not
Britain plans to ease rules
matter: trader’s lawyer
LONDON, Sept 20, (RTRS): A cul-
ture existed at UBS where traders felt
they could ignore risk limits as long
ETFs desk,” wrote fellow trader John
Hughes, who will appear as a witness
later in the trial.
for tech firms share listing
as they were making money for the
Swiss bank, the lawyer for accused
“He would benefit from additional
cynicism,” wrote colleague Makram
London Olympics dents UK retail sector
“rogue trader” Kweku Adoboli told a Fares.
London court on Thursday. Greenidge’s own comments, at a LONDON, Sept 20, (Agencies): Britain plans to make it easi- was looking to create a British version of US President Barack Obama’s JOBS Act,
Adoboli, 32, was arrested on Sept time when he was Adoboli’s manag- which eases regulatory rules for small companies listing on US exchanges.
15, 2011, and is now on trial accused er, included that the young trader
er for technology firms to list their shares in London in a bid Britain should learn from rivals like Nasdaq and make listing more flexible and com-
of fraud and false accounting that worked too hard. to stem the flow of high-growth companies heading across the petitive, he told a room of tech entrepreneurs and investors in London’s East End - an
cost UBS $2.3 billion. He has plead- “He needs to achieve a better Atlantic to raise capital. area the government hopes will become a technology centre to rival California’s Silicon
ed not guilty. work/life balance. We would hate to Europe has seen a slowdown in initial public offerings (IPOs) over the last Valley.
The hearing on Thursday morning see him burn out,” Greenidge wrote. two years as euro zone debt worries buffeted stock markets. Willetts said the proposals, developed with the London Stock Exchange and report-
laid bare the human drama behind the The friendly relations between the Some technology firms have ditched attempts to go public in Europe in favour of the ed by Reuters last week, would allow tech companies to offer less than the 25 percent
jargon of the trading floor, with defendant and the witness were in United States - a more well-established hub for tech flotations. of shares needed for a premium listing and ease reporting requirements.
Adoboli at one point in tears at the evidence in another exchange on a British vacuum technology firm Edwards tried to launch on the London stock mar- Further details will be disclosed in the coming weeks after discussions with investors
back of the courtroom under the emo- chat system, which was partly read and companies, the government said.
tional impact of the evidence that was out and partly paraphrased by ket last year but abandoned it in favour of a US flotation in May.
presented to the jury. Sherrard. David Willetts, Minister of State for Universities and Science, said the government But it wants this route to provide a “launch pad” for European mid-sized high growth
In particular, Adoboli heard his “We don’t call you Mace for noth- businesses seeking a full premium listing
lawyer read out long excerpts from ing,” Adoboli told Greenidge in the on London’s main market.
his performance appraisals, in which chat, a reference to Mace Windu, a Changes
he was described as an outstanding character from one of the Star Wars Any changes will need to coordinated
and popular member of UBS staff movies, to which Greenidge respond- with the UK Listing Authority, part of the
with a great future ahead of him. ed that he felt more like the grizzled Financial Services Authority (FSA) regu-
He also watched Ronald Jedi knight Yoda at the time. lator, which carried out a consultation
Greenidge, a former boss with whom “He was a gamble or two away into listing rules earlier this year and is
he had friendly relations, face a bar- from destroying Switzerland’s largest due to report back next month.
rage of tricky questions from his own bank for his own benefit,” counsel Marcus Stuttard, head of the LSE’s
lawyer, Charles Sherrard. Sasha Wass told the jury at the end of AIM market for smaller companies, said
At one point during the tough her opening statement, which lasted there were already suitable firms interest-
cross-examination, Greenidge all day. ed in taking this new route, which would
became unwell and had to be helped Losses in the double-digit billions likely involve companies larger than a
to a chair by a court usher. The hear- could have been fatal to UBS at a typical AIM-listed business.
ing was adjourned for about half an time when it was trying to recover Entrepreneurs and early-stage
hour before Greenidge resumed giv- from previous colossal losses during investors at Google Campus, a seven-
ing evidence. the 2008 financial crisis, when the floor meeting space for tech start-ups,
His cross-examination was the first Swiss government had to step in to developers and investors, welcomed the
opportunity for Adoboli’s defence rescue it. announcement as a step in the right direc-
team to present his view of events. Wass said Adoboli’s motives were tion but warned that the lack of institu-
The thrust of the argument, to increase his annual bonus, his sta- tional investor focus on the tech sector in
expressed through Sherrard’s ques- tus within the bank, his job prospects London remained a challenge.
tions, was that the bank had turned a and his ego. She said his fraudulent Meanwhile, London’s Olympics have
blind eye to traders exceeding risk deals had wiped 10 percent, or about had a negative impact on Britain’s retail
limits in the pursuit of ever greater $4.5 billion, off the Zurich-based sector, official data showed on Thursday,
profits. bank’s share price. although the country remained set to exit
Sherrard read out an electronic “Like most gamblers, he believed a deep recession in the third quarter.
chat that took place between Adoboli he had the magic touch. Like most Sales volumes in Britain fell 0.2 per-
and Greenidge on April 14, 2011, in gamblers, when he lost, he caused cent during August compared with July,
which Adoboli made it clear he was chaos and disaster to himself and to the Office for National Statistics (ONS)
finishing the trading day with a risk all of those around him,” Wass told said in a statement, as online buying suf-
exposure of $40 million, beyond his the jury. fered the biggest drop in almost five
desk’s agreed $25 million overnight “In effect, Adoboli had ceased to years.
limit. Greenidge did not raise any act as a professional investment The ONS also revealed that sales in
questions about that. banker and had begun to approach his In a file picture taken on March 3, 2011 a Sky sign is pictured at the British Sky Broadcasting headquarters in west London.
Britain’s media regulator Ofcom on Sept 20 allowed BSkyB to keep its broadcasting licences, after a probe into allega- August grew 2.7 percent compared with
Culture work as a naked gambler. He had the same period a year earlier.
become what is sometimes referred tions of hacking by the pay-TV giant which is part-owned by Rupert Murdoch. (AFP)
“This is, I suggest, the first exam- However, non-store retail sales —
to as a rogue trader.”
ple of where the culture and practice
of the bank you were both working Episode UK regulator criticises James Murdoch which is mostly online business but also
includes mail order — tumbled by 6.7
for was that risk limits didn’t matter The episode knocked back UBS’s percent in August. That was the biggest
as long as you were making money,”
Greenidge answered: “That’s not
recovery effort. It led to a manage-
ment shake-up, a change of strategy,
a tightening of internal controls and a
BSkyB cleared of hacking scandal links monthly drop since December 2007.
“Feedback from online retailers sug-
gests that sales were lower as consumers
true.” reduced 2011 bonus round for some LONDON, Sept 20, (RTRS): Britain’s “In our view, James Murdoch’s conduct illegal payments to public officials. watched the Olympics instead of shop-
It was almost immediately after staff at a firm ranked in the top three media regulator gave pay-TV firm BSkyB in relation to events at News Group The subsequent scrutiny of the compa- ping online,” the ONS said.
that exchange that Greenidge asked dozen banks worldwide. a clean bill of health on Thursday, saying Newspapers repeatedly fell short of the ny has meant the issue of whether the The London Games took place for a
for a pause because he felt unwell. Wass urged the jurors not to think there was no evidence it was linked to a exercise of responsibility to be expected Murdochs were “fit and proper” to run a little over two weeks covering mostly the
Greenidge was dismissed from of the case in terms of losses suffered phone hacking scandal which engulfed of him as CEO and chairman,” it said. “To British media company had become a first half of August.
UBS after Adoboli’s arrest on the by “anonymous groups of rich peo- Rupert Murdoch’s News Corp, its largest date (however), there is no evidence that recurring theme, after a parliamentary The Paralympics, which were held also
grounds that he had failed in his ple”. shareholder. Sky was directly or indirectly involved in committee said the scandal had shown in London, occurred between Aug 29 and
supervisory role by not detecting The real losers, she said, were the However, Ofcom criticised Murdoch’s any of the wrongdoing either admitted or Rupert Murdoch was not fit to run a major Sept 9.
what Adoboli was doing. He told the bank’s shareholders and investors son James for failing to investigate allega- alleged to have taken place at News of the international company. “The (retail) survey dates for these
court he felt aggrieved by the who included people “like you and tions of criminality at the group’s newspa- World or The Sun.” More than 80 people have now been August figures included the great majori-
“unfair” disciplinary process and that me”, such as employees with hold- pers properly, describing his failure to Prompted arrested over allegations of phone hack- ty of the Olympic Games period (27 July-
he believed he had been made a ings in pension and trust funds. uncover the scale of the problem as “both ing, illegal payments, computer hacking 12 August) with the Games appearing to
scapegoat. Wearing a grey suit and a purple difficult to comprehend and ill-judged”. Prompted by the admission that News have had a notable impact on some of the
of the World journalists had hacked into and attempts to pervert the course of jus-
Earlier, the reading out of passages tie, Adoboli sat on a bench alongside The ruling by Ofcom, which has tice. numbers,” said Investec bank analyst
from Adoboli’s 2009 and 2010 per- his lawyers at the back of the well- clashed repeatedly with BSkyB in the the voicemails of celebrities, politicians Victoria Clarke.
and crime victims, Ofcom had examined Two of the most high profile to be held
formance appraisals gave a flavour of worn courtroom, in a scene that could past, will lift a cloud that had long hung “Indeed the sharp ‘non-store’ sales
whether News Corp was an appropriate are Rebekah Brooks, the former head of drop looks to be due to the Olympics hav-
life on the Exchange Traded Funds hardly have been more different from over the hugely successful group and will
(ETFs) desk when Adoboli worked life on a sleek financial trading desk owner of BSkyB and whether James Murdoch’s British newspaper arm, and ing had a negative impact on online sales
allow it to focus on the challenges of
there. at a major international bank. intensifying competition and growing Murdoch was an appropriate director. Andy Coulson, a former News of the in particular.
Adoboli’s colleagues described Following British legal tradition economic pressures on its customers. The ruling brings to an end one of the World editor who became the spokesman “With sports fans glued to their televi-
him as an excellent ambassador for the judge and lawyers wore white Ofcom concluded BSkyB was “fit and many outstanding concerns for the for Cameron’s government until he sions and laptops to watch events, and
UBS with a talent for explaining to wigs and long robes. Telephones, proper” to hold a broadcasting licence and Murdoch family. resigned. perhaps the Olympic ticketing site too,
clients the ins and outs of ETFs, a cameras and recording devices were avoided making the most serious ruling The admission of criminality at “This was, on balance, expected but it online sales represented their lowest pro-
form of derivative. not allowed, and evidence was gath- that News Corp should sell down some of Murdoch’s powerful British newspaper definitely removes an overhang on the portion of total sales values since August
“He could explain ETFs to my Nan ered in huge piles of old-fashioned, its near 40 percent holding. arm, including the detail that staff had stock,” Liberum analyst Ian Whittaker 2011,” she added.
(grandmother) and she’d get it,” lever-arch files bulging with paper- But it sharply criticised James hacked into the voicemails of a murdered said of Ofcom’s findings. “This wasn’t Britain is currently mired in recession,
wrote colleague Rob Pienaar in one work. Murdoch, a former chief executive and schoolgirl, sent shockwaves through the seen as a huge threat to the business but ... which the coalition Conservative-Liberal
of the appraisals. The court heard that Adoboli was chairman of BSkyB who was in charge of political and media establishment last this was seen as a risk, because Ofcom Democrat government blames largely on
Adoboli was portrayed as a friend- educated at a British private school News Corp’s British newspaper arm when year. and Sky don’t have a great relationship.” the debt crisis in key trading partner the
ly and enthusiastic trader who would where he was head boy, an early the scandal exploded last year at its now Under pressure for his own close ties to News Corp said it welcomed the find- eurozone.
drop whatever he was doing at a stamp of talent and leadership skills. defunct News of the World. He stepped Murdoch’s media group, Prime Minister ings but disagreed with the criticism of The main opposition Labour party
moment’s notice to help out his col- He graduated from Nottingham down as chairman of BSkyB in April in an David Cameron ordered a judge-led James Murdoch, pointing out that he had claims that Britain’s downturn is mainly a
leagues. University with a degree in e-com- attempt to protect the company’s reputa- inquiry into press standards while some helped to make the business the most suc- result of hefty cuts to state spending that
“He’s certainly the good cop of the merce and digital business studies. tion from being damaged, but remains on journalists at Murdoch’s daily Sun tabloid cessful pay-TV group in Britain with have resulted in thousands of job losses
the board. are still being arrested over allegations of more than 10 million customers. across the civil service.