:00:12. > :00:16.With protests erupting around the world against the financial sector
:00:16. > :00:21.at the moment, we gather three people from that industry today and
:00:21. > :00:24.we devote the whole programme to one all-important question, do
:00:24. > :00:29.those finance guys really create wealth or simply find elegant ways
:00:29. > :00:34.of distributing other people's wealth for themselves? Each week,
:00:34. > :00:44.influential business leaders gather for The Bottom Line. Now, you can
:00:44. > :00:51.
:00:51. > :00:57.see it as well as he read. -- here First of all, let spending a few
:00:57. > :01:01.minutes meeting the guests. The panel perhaps doesn't represent the
:01:01. > :01:07.kind of financial institutions that attract much of the protesters'
:01:07. > :01:13.rough. We struggled to get the CEO Ollanta Humala of investment banks
:01:13. > :01:23.on the programme to answer the questions. A look like to ask you
:01:23. > :01:26.
:01:26. > :01:31.to explain what each of your First of all, can Elyza. I run an
:01:31. > :01:36.organisation that is a pretty technology merchant bank. Boutique
:01:36. > :01:39.mean small, we have three partners. Technology is information
:01:39. > :01:44.technology. Merchant bank means the combination of clever creative
:01:44. > :01:48.people, access to a powerful network of contacts and access to
:01:48. > :01:58.capital. We applied as to help early-stage going, potential IT
:01:58. > :02:00.
:02:00. > :02:07.companies find their feet. Also with us. I M CEO of eight FTSE 100
:02:07. > :02:12.company. We are based in Bristol in the west of London. We control
:02:12. > :02:18.about �22 billion of people's money. That is about $35 billion. We are
:02:18. > :02:23.best known for helping people invest directly in funds and shares.
:02:23. > :02:28.You don't actually have Iran trader sitting on the floor in Bristol
:02:28. > :02:32.yourself, it is about someone wanting to invest the money and
:02:32. > :02:36.coming to you. You will execute all that for them? Are it is self
:02:36. > :02:40.directed investment. You will probably decide what you want to
:02:40. > :02:46.invest in and probably do it through websites. Your customers
:02:46. > :02:53.are retail customers and are mostly based in the UK? That's right.
:02:53. > :03:00.Saved from a third guest, please. m b CEO of or a mutual. I had been
:03:00. > :03:03.since five days before linens went bust in 2008. We are in
:03:03. > :03:09.international financial services group. The largest operations are
:03:09. > :03:17.in South Africa, where we have business. We are property in cash
:03:17. > :03:24.insurance. Our other major areas are in Sweden in the UK. We also
:03:24. > :03:30.have operations across Europe, the Far East and also, Latin America.
:03:30. > :03:38.You mentioned in parting there, you have a bank in South Africa?
:03:38. > :03:43.We would like to. Part of the process we have been going through
:03:43. > :03:47.over the past three years is to try and focuses back on Abrial core
:03:47. > :03:52.competence, long-term savings, managing people's money and hazard
:03:52. > :03:55.management. We have roughly 30 long-term savings insurance
:03:55. > :04:01.businesses. We have roughly 30 different asset management groups
:04:01. > :04:07.and one very large bag. Therefore, I would like to come out of baking.
:04:07. > :04:10.Is it a good time to sell a bank? It is proving somewhat difficult.
:04:10. > :04:17.Gentlemen, you have explained what you do and I think the distinctions
:04:17. > :04:23.are relatively clear. You don't beat me to tell me that there is a
:04:23. > :04:27.lot of anger at the furniture sector. Interestingly, unlike the
:04:27. > :04:31.period when we had 80 capitalist despite -- demonstrations in the
:04:31. > :04:37.Nineties, I think it was possible then to dismiss those as fringe
:04:37. > :04:41.used and really not very mainstream. The difference is that this time,
:04:41. > :04:46.quite a lot of mainstream thing is are saying, we need to rebuild the
:04:46. > :04:52.relationship with finance. I would like to put a fundamental question
:04:52. > :04:57.at the root of this. Is the industry generating of, or is it,
:04:57. > :05:07.essentially, parasitic? What do you think of the protests? Are you on
:05:07. > :05:13.their side? Talk me through your views. I am not on the side of the
:05:13. > :05:18.protesters. I do believe that things have gone wrong and clearly,
:05:18. > :05:23.there does need to be a change. Regulation has allowed things that
:05:23. > :05:29.have proved to be very damaging. Fundamentally, if you look at
:05:29. > :05:34.financial services, the banks provide liquidity that oil the
:05:34. > :05:43.wheels that keeping businesses going. The insurance sector
:05:43. > :05:48.provides the protection for people. Fundamentally, they are doing
:05:48. > :05:54.useful things. When we get to the dislocation we have had over the
:05:54. > :05:59.last years, people have clearly lost out. When the banks were
:05:59. > :06:02.providing mortgages, and allowing people to buy homes, then everybody
:06:02. > :06:06.said what a good service they were doing. When the house prices
:06:06. > :06:12.crashed and they could not afford to repay them, then who are they
:06:12. > :06:16.going to hit out at? The bank's lending the money. It in a bed with
:06:16. > :06:20.insurance. When your car crashes and somebody pays you to replace it,
:06:20. > :06:24.then financial services are good. When your premiums go up, because
:06:24. > :06:29.everybody is crashing their cars, then financial services are bad. I
:06:29. > :06:35.think we are going through a period of time when it is easy to knock
:06:35. > :06:42.the people who have facilitated people being able to purchase the
:06:42. > :06:47.things that they want. I am completely against them for two
:06:48. > :06:53.reasons. One, I find them deeply irritating. If they were to have a
:06:53. > :07:00.rational argument, then have one. Occupying places is is rational. It
:07:00. > :07:04.reminds me of an irritating student time. It seems every other day at
:07:04. > :07:11.college, which had to sign petitions just to get past another
:07:11. > :07:15.idiot. The argument was for an argument. I Miguez and because it
:07:15. > :07:20.is irritating. More fundamentally, I against him because it is ill
:07:20. > :07:27.judged. Even if they were incoherent, what are the arguing
:07:27. > :07:30.against. They are not providing an alternative that. They are driving
:07:30. > :07:34.down confidence in a sector that employs a couple of million people
:07:34. > :07:40.in the UK. It makes it harder and harder for us not to look stupid in
:07:40. > :07:46.the world at large. I think one has to understand the pain that
:07:46. > :07:51.everybody is going through. People therefore wanted and that pain. I
:07:51. > :07:55.think it is perfectly understandable. We have people who
:07:55. > :08:00.are going to lose their jobs, who are finding that they cannot afford
:08:00. > :08:07.the basic things. People want somebody to blame. It is quite
:08:07. > :08:13.clear that, you know, that part of the issue has come through banks
:08:13. > :08:16.need to be reformed. The thing is you were talking about it is being
:08:16. > :08:21.eight understandable that people turn to the Danes as a stick a good.
:08:21. > :08:26.The banks are to blame, which is why they had been pointed out. They
:08:26. > :08:30.lent too easily and that created a lot of problems. Of course, people
:08:30. > :08:38.are grateful to be lent money it might have some stake in the plane.
:08:38. > :08:44.For those that did not borrowed irresponsibly... I would have said
:08:44. > :08:50.that things are not good and therefore, people are against it.
:08:50. > :08:54.At hoon debate and? This is the same argument about people breaking
:08:55. > :09:04.into shops over the riots. We are going to say that every wrong thing
:09:05. > :09:06.
:09:06. > :09:12.can be laid at the feet of It is not logical. A I have some
:09:12. > :09:16.sympathy with them. I understand why people are frustrated. Looking
:09:16. > :09:22.after people's money is one of the things that financial-services
:09:22. > :09:27.company to do it. Think the primacy of that has been forgotten by some
:09:27. > :09:30.financial services. Some people have paid themselves a lot of money
:09:30. > :09:34.for not doing a great job. They can understand why people are
:09:34. > :09:38.frustrated. Financial services has got to recognise it as a very
:09:38. > :09:46.important job. Mr do the job properly, otherwise it will get
:09:46. > :09:50.criticism. Sticky thing for me is they conversation has to move on.
:09:50. > :09:56.We have had three years now where the banks had been beaten up and
:09:56. > :10:00.financial-services as well. It is no surprise that we are finding
:10:00. > :10:05.that the liquidity of the credit is not being advanced to the small
:10:05. > :10:09.businesses moving forward. We have put up the net of catapult --
:10:09. > :10:16.capital but they accepted keep. At the end of the day, but whether we
:10:16. > :10:22.like it or not, we have to persuade and make the position where the
:10:22. > :10:25.banks will start lending more. You can do it by beating them up?
:10:25. > :10:33.not the politician saying cobble things about them that stops them
:10:33. > :10:36.from mending. It is more to do with the complexity of the issue.
:10:36. > :10:42.politicians are turning around and asking them to get more capital,
:10:42. > :10:46.because we cannot allow. But back in business, you have to make
:10:46. > :10:51.higher returns. If you're going to make higher returns, you're going
:10:51. > :10:55.to lend less. This is an amazing conversation, because you are all
:10:55. > :11:04.being very defensive. Is it possible to have any sympathy with
:11:04. > :11:09.a sector that allowed itself to borrowed �40 of every pound of its
:11:09. > :11:16.own capital. In other words, the 2.5 per cent, three per cent loss
:11:16. > :11:26.in the asset base. For that, they were paid millions of pounds. By
:11:26. > :11:26.
:11:26. > :11:32.using bet that sector deserves your sympathy? You do not understand why
:11:32. > :11:39.people will be angry? I think things go wrong and there have to
:11:39. > :11:44.beat consequences. On one side, the bank is trying to gamble
:11:44. > :11:50.effectively with with money to try and make more money. On the other
:11:50. > :11:54.side, it is bidding to look after people. It is the other end of the
:11:54. > :11:59.respect and and. They are trying to do but the best things is almost
:11:59. > :12:02.impossible. There is a consensus that then is to be a firm Wall
:12:02. > :12:06.between the casino operation of investing the bank's own money in
:12:06. > :12:12.the Italy of -- utility operation of managing and looking after other
:12:12. > :12:16.people's money. That has more of has been fought. We can hold
:12:16. > :12:22.debates accountable and we should do, but we have to move on. You say
:12:22. > :12:25.we should move on, but we haven't had accountability. No one has paid
:12:25. > :12:30.back the money they have owned in the good news for the mistakes they
:12:30. > :12:36.were making. We have people that were burning pensions whooping
:12:36. > :12:44.Rapid great national institutions. Where is your anger, a dinner
:12:44. > :12:48.understand we're not more annoyed In our business, we are quite
:12:48. > :12:55.annoyed about it. A one of the jobs we have to do when quiet place how
:12:55. > :13:02.many were thus is we have defined banks that we can rely on. That has
:13:02. > :13:07.become remarkably difficult. Banks are not as safe as they once were.
:13:07. > :13:13.The plain logic here is to choose a random act and get angry about it.
:13:13. > :13:17.If someone borrows more money than they can afford to pay back from a
:13:17. > :13:27.bank, it ceases to become their fault, it becomes the system's
:13:27. > :13:37.
:13:37. > :13:42.I expect some poor person who is told they can afford to borrow
:13:42. > :13:48.money, I'd get expect them to exert the same financial responsibility
:13:48. > :13:53.of someone who's job it is to lend. There is an enormous amount of
:13:53. > :13:59.suffering among people who borrow too much that and now struggling to
:13:59. > :14:03.pay it back. They are suffering the consequences. Where is the
:14:03. > :14:08.responsibility of the people who led to the money? There needs to be
:14:08. > :14:12.responsibility in the system. If you have a system in which people
:14:12. > :14:16.can make bets, and if the bats turn out well, they wind. If the bets
:14:16. > :14:22.turn out badly, the taxpayer loses. Everyone who works at Lehman
:14:22. > :14:27.Brothers for example has paid the price. Jobs of the mast,
:14:27. > :14:35.reputations of the mast. Companies have gone. There have been enormous
:14:35. > :14:44.amounts of distribution of pain in Is
:14:44. > :14:49.why we are to tackle. -- systemic point is what we have to tackle.
:14:49. > :14:58.you want to learn more about what we have talked about, or visit our
:14:58. > :15:02.website. Let's talk about whether. What
:15:02. > :15:09.finance gets up to whether it is socially useful or not. Hugh is a
:15:09. > :15:17.theory. A lot of what goes on in finance is not like a car factory.
:15:17. > :15:22.A car factory produces a car. If one car factory produces a car, it
:15:22. > :15:26.does not displace another car that another factories producing. A lot
:15:26. > :15:31.of what you guys do it is not about creating the extra car but a spot
:15:31. > :15:35.in the car factory one step ahead of the other guy. It is less about
:15:35. > :15:42.creating extra Valley and warned about securing your position
:15:42. > :15:47.relative to someone else. He rather creative metaphor. Basically what
:15:48. > :15:55.you are about is spotting talent and skill and profits. That is one
:15:55. > :15:59.step removed from the creation of it. Is that there? The man or woman
:15:59. > :16:09.who runs a car factory has to spot a gap in the market that his or her
:16:09. > :16:11.
:16:11. > :16:15.cars can fill. In that context it is no different. I think
:16:15. > :16:21.fundamentally when people invest, they are investing in a company or
:16:21. > :16:27.organisation. It needs that capital to grow. Without that investment,
:16:27. > :16:31.they would be able to. Financial- services are still trying to
:16:31. > :16:40.produce products that customers want and need. You are providing a
:16:40. > :16:44.service. Let's go back to the insurance example. Somebody wants
:16:44. > :16:49.protection and somebody wants to have a mortgage and therefore the
:16:49. > :16:55.banks will provide the credit for that to be done. There are other
:16:55. > :17:01.things that are done that may be for an institution's own account
:17:01. > :17:08.but what we're doing fundamentally is providing services and solutions
:17:08. > :17:18.that the customer wants. We go bust if we're not thinking about what a
:17:18. > :17:22.
:17:22. > :17:30.customer needs or might need. couldn't offer guarantees. It went
:17:30. > :17:36.bust. You had to put a lot of money into it? Yes we did. Effectively it
:17:36. > :17:43.handed back the premiums and said the insurance we're providing you
:17:43. > :17:51.is no longer be provided. We stood by and it has been painful. We
:17:51. > :18:00.provided guarantees for those customers and what we failed to do
:18:00. > :18:07.was properly make sure we hedged and provided internally the right
:18:07. > :18:10.resources. As the markets went down, we had to pump our own money in to
:18:10. > :18:20.honour our guarantees to the customers. It has been very painful
:18:20. > :18:21.
:18:21. > :18:29.to the group. You stood by all the promises? Absolutely. I'm not
:18:29. > :18:32.saying all finance is a waste of time. The thing some of it is? For
:18:32. > :18:38.example, very clever people working out complicated financial
:18:38. > :18:44.instruments barely understood by other very clever people and buying
:18:44. > :18:54.them at prices that are very hard to ascertain the accuracy are of.
:18:54. > :18:55.
:18:55. > :18:58.Good work? Bad work? Hobbies the outcome of a competitive world
:18:58. > :19:05.function in market what are these a distraction we would be better
:19:05. > :19:09.without? They are a function of very clever people and I think your
:19:09. > :19:13.argument holds, today prove worthwhile for society? I think it
:19:13. > :19:17.has been proven they have not. There are still on -- still things
:19:17. > :19:23.out there today that I'd still do not understand how they provide a
:19:23. > :19:29.lot of wealth to society. Things like short-selling. That does not
:19:29. > :19:39.feel right to me. And its usefulness to society sounds quite
:19:39. > :19:41.
:19:41. > :19:51.limited. There are still activities out there... Anyone can sell
:19:51. > :19:56.anything they like. If you buy something you don't understand, I
:19:56. > :20:01.was on the board of a company in North America that had the shares
:20:01. > :20:05.shorted by people who thought they could drive the business into panic
:20:05. > :20:09.and to drive the share price down. It made the company and board
:20:09. > :20:13.become ever more resilient against them. That company is now a multi-
:20:13. > :20:23.billion dollar business. I don't agree. I think if you accept a
:20:23. > :20:25.
:20:25. > :20:28.market concept their weakness will be a source of profit is some.
:20:28. > :20:37.the people who had played very big gains in a complicated market,
:20:37. > :20:45.should they all have gone past? They were all rescued by taxpayers,
:20:45. > :20:55.Goldman Sachs who benefited hugely from the American taxpayer. Where
:20:55. > :20:58.
:20:58. > :21:02.is that capitalist system, where is the justice in it? If you want to
:21:02. > :21:06.think about one went wrong in the tack -- banking crisis is that were
:21:06. > :21:11.reports taxpayer money into bailing out banks, it was not a good deal
:21:11. > :21:21.for the taxpayer. The difficulty is you don't have time. You have to
:21:21. > :21:22.
:21:22. > :21:27.make a decision. They know they are going to be rescued. That is why
:21:27. > :21:32.they managed to be read so much money. The peace that comes Ford is
:21:32. > :21:35.that we must make sure we get the right structure moving forward.
:21:35. > :21:40.What about the culture of those who have worked in the financial
:21:40. > :21:46.sector? That may suggest that one might like to deal with people who
:21:46. > :21:53.deal in a sector where you take pride in what you're selling and
:21:53. > :21:58.only sell something if you think it is good. Arguably what happened was
:21:58. > :22:06.that they did not take pride in what they were selling and only
:22:06. > :22:13.thought, can I get away with selling this legally? What t think
:22:13. > :22:23.about the court to? The buyer has to be as intelligent as the seller
:22:23. > :22:30.
:22:30. > :22:37.otherwise the market does not work. out of it. Any other asset they
:22:37. > :22:40.will buy for resale. They have drawn this distinction between the
:22:40. > :22:49.retail banking sector and the normal person. I am very relaxed
:22:50. > :22:56.about that. My focus is on a try to turn something from nothing in two
:22:56. > :23:06.-- into a multi- billion dollar value business. It is my fault if
:23:06. > :23:06.
:23:06. > :23:14.somebody sells me something dodgy. Thank you. Ken Olisa, Ian Gorham