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Who are the senior bankers calling for separation?

Here is a list of senior bankers and key industry figures calling for the complete separation of retail from investment banks.

Some, such as former Citigroup CEO Sandy Weill, have reversed their previous opposition in what the Financial Times has dubbed an “epic conversion“.  They join the chorus of commentators calling for simple, structural reform that goes beyond the US’s Volcker and UK’s Vickers proposals. Some of the more notable names are below. To read Finance Watch’s proposals on the structural reform of banks, see our submission to the Liikanen Group.

Sandy Weill, former CEO Citigroup and principle driver behind repeal of Glass-Steagall

“What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail.”

25 July 2012, CNBC

Mike Mayo, the star bank analyst of CLSA (Crédit Agricole Group) in New York:

“For the most part these big, clumsy, do-everything banks are cheaper than their more-focused regional counterparts. One bank analyst, Mike Mayo of CLSA, on Wednesday suggested that Morgan Stanley might be worth up to $32 a share — it currently trades at about $13 — if it were split into smaller parts.”

26 July 2012, The Huffington Post

Andrea Leadsom, British Conservative MP and former senior banker at Barclays

“The issue of a complete separation of retail and investment banking should also return to the agenda. It is right that the government should be the ultimate guarantor of retail deposits but that guarantee should not extend to high-risk transactions.”

20 July 2012, www.andrealeadsom.com

Nikolaus von Bomhard, CEO of Munich Re

“Ich bin Anhänger des Trennbankensystems”

Translation: “I’m a fan of a separated banking system”

17 July 2012, Der Spiegel

Luigi Zingales, professor at the University of Chicago Booth School of Business

 “Over the last couple of years, however, I have revised my views and I have become convinced of the case for a mandatory separation.”

10 June 2012, Financial Times

Sir Martin Taylor, former CEO of Barclays

“I had observed similar things going on elsewhere, and I decided that it was neither safe nor sensible to have trading businesses mixed up in a retail and commercial banking group. Vastly more evidence has since accumulated in favour of this argument. Aligning public and private interests has proved impossible, and so in the crisis taxpayers suffered as well as shareholders – exactly the problem that the Vickers proposals address.”

“In October 1998, I put to the Barclays board –some ways of thinking about disentangling the two businesses. They seemed not to want to know. In those circumstances, I told Andrew Buxton, my chairman, I could not stay much longer.”

8 July 2012, Financial Times

Liam Halligan, chief economist at Prosperity Capital Management and Daily Telegraph economics columnist

“A Glass-Steagall split needs to happen and someone needs to get it done. There really is no alternative.”

7 July 2012, Daily Telegraph

Peter Hambro, chairman of Petropavlosk and scion of Hambros Bank family

“They should never have been together and now they should be split, completely.”

6 July 2012, Evening Standard

Lord (Paul) Myners, former British Labour MP and City Minister, former CEO Gartmore Group

“We need to go to what is known as a Glass-Steagall model, which is a complete separation …”

4 July 2012, Channel 4 News

Financial Times editorial

“We are now ready to go further. For all the diversification benefits, the cultural tensions between investment and retail banking can only be resolved by totally separating the two, on formal Glass-Steagall-style lines.”

3 July 2012, ft.com

Terry Smith, CEO Tullet Prebon

“The UK and the US must enact a Glass-Steagall Act and separate retail and investment banks. The only people who seem to have lobbied against such separation are bankers. Why are we listening to them?”

1 July 2012, Guardian

Philip Purcell, former chairman and CEO of Morgan Stanley

“Breaking these companies into separate businesses would double to triple the shareholder value of each institution”

25 June 2012 WSJ27 June 2012 Bloomberg

Walter B Jones Jr, Republican, US Representative for North Carolina

“The two worst votes I made in the 18 years I’ve been in Congress were, the Iraq war, which was very unnecessary and the repeal of Glass-Steagall… isn’t it time to have a discussion and a debate about the reinstatement of Glass-Steagall?”

25 June 2012, Larouchepac26 June 2012, American Banker

Christophe Nijdam, former CEO of a French bank in the US and bank analyst at AlphaValue (ranked “Best Independent Research Firm” in France by Thomson Reuters – Extel, June 2012):

“L’option Glass Steagall s’avère ainsi être la meilleure pour toutes les parties prenantes, à l’exception des dirigeants de banque et des traders” (…) “Il s’agit d’une opportunité historique permettant de réconcilier l’intérêt privé des actionnaires avec l’intérêt général”

Translation : “Glass Steagall is the best solution for all stakeholders, except bank top management and bank traders.” (…) “This is a historic opportunity to reconcile shareholder private interests with the public interest”,

14 June 2012, L’Agéfi 

David Komansky, former CEO of Merrill Lynch

“Unfortunately, I was one of the people who led the charge to try to get Glass-Steagall repealed. … I regret those activities and wish we hadn’t done that.”

5 May 2012, Bloomberg video

Jérôme Cazes, former CEO of French Credit insurer Coface and former member of the executive board of Natixis Bank

“Dans tous les autres secteurs d’activité, on dit qu’il vaut mieux être sur un seul métier. Or cette règle serait fausse – mais alors pour quelle raison ? – dans la finance. J’attends toujours des arguments convaincants en faveur des synergies entre la banque de marché et la banque de détail ! En réalité, ces deux univers n’ont rien à voir entre eux, que ce soit en termes de gestion du temps, des motivations, de rémunérations. Entre le banquier de marché et le banquier de détail, c’est bien plus que de l’incompréhension, du mépris”

Translation: “In any other industry, it is considered best to focus on a specific business area. Yet this rule is said to be false in the finance sector – I wonder for what reason! I am still waiting to hear convincing arguments regarding synergies between investment and retail banking. In fact, capital market banking and retail banking have nothing in common: time horizon, incentives and compensation are totally different, and their mutual misunderstanding is close to mutual contempt.”

2 February 2012, Le Nouvel Economiste

Jean Peyrelevade, former CEO of universal bank Credit Lyonnais, head of Banco Leonardo in France :

“Cette idée de ‘ring-fencing’ est excellente s’il s’agit d’une étape intermédiaire. A terme, je plaide pour une séparation complète des activités de détail des activités d’investissement […] Si on s’interdit d’aller plus loin [que le cantonnement], on s’expose à la réapparition, sous une forme inattendue, des problèmes de contagion des risques entre banque d’investissement et banque de detail”

Translation: “Ring-fencing is an excellent idea if it’s an intermediary step.  In my view, the final objective should be to completely separate retail and investment banking activities […] If we shy away from this, we will be exposed to a resurgence of risk contagion from investment to retail banking through new, unexpected channels.”

11 January 2012, La Tribune

John Reed, former Citigroup chairman

“There is no societal benefit from integrating them [investment and retail banks]”

December 2011, Financial World

Stanislas Yassukovich, former chairman Merrill Lynch Europe

“The megabank business model is indefensible”

24 November 2011, CSFI “Views on Vickers”

Lord (Nigel) Lawson, former British Conservative MP and chancellor during “big bang” (the UK’s period of rapid deregulation in the 1980s)

“…investment bank taking risks on the back of the taxpayer guarantee is a great scandal. I myself would have liked to see a complete separation between retail banking and investment banking.”

11 April 2011, BBC

Sir Brian Pitman, former LloydsTSB chairman

“The arguments in favour [of Glass-Steagall] are compelling”

24 October 2009, Daily Telegraph

Mervyn King, governor of the Bank of England

“There are those who claim that such proposals [for full separation] are impractical. It is hard to see why.”

20 October 2009, speech

Uwe Fröhlich, President of the Association of German mutual banks

“Steuerzahler sollten nicht für potenzielle Risiken spekulativer Kapitalmarktgeschäfte gerade stehen”, sagte Uwe Fröhlich, Präsident des Bundesverbands der Deutschen Volksbanken und Raiffeisenbanken (bvr) der Zeitung “Die Welt”. Insofern könne man “über die Trennung von Investmentbanking und Kundengeschäft durchaus nachdenken”.

Translation: “Taxpayers should not be held responsible for the potential risks of speculative financial market transactions”, said Uwe Fröhlich, President of the Association of German mutual banks. Insofar it seems fair to him “to think about separating investment banking from commercial banking”.

18 October 2011, DEUTSCHLAND today

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