Episode 5 The Bottom Line

With protests erupting around the world against the financial sector

at the moment, we gather three people from that industry today and

we devote the whole programme to one all-important question, do

those finance guys really create wealth or simply find elegant ways

of distributing other people's wealth for themselves? Each week,

influential business leaders gather for The Bottom Line. Now, you can

see it as well as he read. -- here First of all, let spending a few

minutes meeting the guests. The panel perhaps doesn't represent the

kind of financial institutions that attract much of the protesters'

rough. We struggled to get the CEO Ollanta Humala of investment banks

on the programme to answer the questions. A look like to ask you

to explain what each of your First of all, can Elyza. I run an

organisation that is a pretty technology merchant bank. Boutique

mean small, we have three partners. Technology is information

technology. Merchant bank means the combination of clever creative

people, access to a powerful network of contacts and access to

capital. We applied as to help early-stage going, potential IT

companies find their feet. Also with us. I M CEO of eight FTSE 100

company. We are based in Bristol in the west of London. We control

about �22 billion of people's money. That is about $35 billion. We are

best known for helping people invest directly in funds and shares.

You don't actually have Iran trader sitting on the floor in Bristol

yourself, it is about someone wanting to invest the money and

coming to you. You will execute all that for them? Are it is self

directed investment. You will probably decide what you want to

invest in and probably do it through websites. Your customers

are retail customers and are mostly based in the UK? That's right.

Saved from a third guest, please. m b CEO of or a mutual. I had been

since five days before linens went bust in 2008. We are in

international financial services group. The largest operations are

in South Africa, where we have business. We are property in cash

insurance. Our other major areas are in Sweden in the UK. We also

have operations across Europe, the Far East and also, Latin America.

You mentioned in parting there, you have a bank in South Africa?

We would like to. Part of the process we have been going through

over the past three years is to try and focuses back on Abrial core

competence, long-term savings, managing people's money and hazard

management. We have roughly 30 long-term savings insurance

businesses. We have roughly 30 different asset management groups

and one very large bag. Therefore, I would like to come out of baking.

Is it a good time to sell a bank? It is proving somewhat difficult.

Gentlemen, you have explained what you do and I think the distinctions

are relatively clear. You don't beat me to tell me that there is a

lot of anger at the furniture sector. Interestingly, unlike the

period when we had 80 capitalist despite -- demonstrations in the

Nineties, I think it was possible then to dismiss those as fringe

used and really not very mainstream. The difference is that this time,

quite a lot of mainstream thing is are saying, we need to rebuild the

relationship with finance. I would like to put a fundamental question

at the root of this. Is the industry generating of, or is it,

essentially, parasitic? What do you think of the protests? Are you on

their side? Talk me through your views. I am not on the side of the

protesters. I do believe that things have gone wrong and clearly,

there does need to be a change. Regulation has allowed things that

have proved to be very damaging. Fundamentally, if you look at

financial services, the banks provide liquidity that oil the

wheels that keeping businesses going. The insurance sector

provides the protection for people. Fundamentally, they are doing

useful things. When we get to the dislocation we have had over the

last years, people have clearly lost out. When the banks were

providing mortgages, and allowing people to buy homes, then everybody

said what a good service they were doing. When the house prices

crashed and they could not afford to repay them, then who are they

going to hit out at? The bank's lending the money. It in a bed with

insurance. When your car crashes and somebody pays you to replace it,

then financial services are good. When your premiums go up, because

everybody is crashing their cars, then financial services are bad. I

think we are going through a period of time when it is easy to knock

the people who have facilitated people being able to purchase the

things that they want. I am completely against them for two

reasons. One, I find them deeply irritating. If they were to have a

rational argument, then have one. Occupying places is is rational. It

reminds me of an irritating student time. It seems every other day at

college, which had to sign petitions just to get past another

idiot. The argument was for an argument. I Miguez and because it

is irritating. More fundamentally, I against him because it is ill

judged. Even if they were incoherent, what are the arguing

against. They are not providing an alternative that. They are driving

down confidence in a sector that employs a couple of million people

in the UK. It makes it harder and harder for us not to look stupid in

the world at large. I think one has to understand the pain that

everybody is going through. People therefore wanted and that pain. I

think it is perfectly understandable. We have people who

are going to lose their jobs, who are finding that they cannot afford

the basic things. People want somebody to blame. It is quite

clear that, you know, that part of the issue has come through banks

need to be reformed. The thing is you were talking about it is being

eight understandable that people turn to the Danes as a stick a good.

The banks are to blame, which is why they had been pointed out. They

lent too easily and that created a lot of problems. Of course, people

are grateful to be lent money it might have some stake in the plane.

For those that did not borrowed irresponsibly... I would have said

that things are not good and therefore, people are against it.

At hoon debate and? This is the same argument about people breaking

into shops over the riots. We are going to say that every wrong thing

can be laid at the feet of It is not logical. A I have some

sympathy with them. I understand why people are frustrated. Looking

after people's money is one of the things that financial-services

company to do it. Think the primacy of that has been forgotten by some

financial services. Some people have paid themselves a lot of money

for not doing a great job. They can understand why people are

frustrated. Financial services has got to recognise it as a very

important job. Mr do the job properly, otherwise it will get

criticism. Sticky thing for me is they conversation has to move on.

We have had three years now where the banks had been beaten up and

financial-services as well. It is no surprise that we are finding

that the liquidity of the credit is not being advanced to the small

businesses moving forward. We have put up the net of catapult --

capital but they accepted keep. At the end of the day, but whether we

like it or not, we have to persuade and make the position where the

banks will start lending more. You can do it by beating them up?

not the politician saying cobble things about them that stops them

from mending. It is more to do with the complexity of the issue.

politicians are turning around and asking them to get more capital,

because we cannot allow. But back in business, you have to make

higher returns. If you're going to make higher returns, you're going

to lend less. This is an amazing conversation, because you are all

being very defensive. Is it possible to have any sympathy with

a sector that allowed itself to borrowed �40 of every pound of its

own capital. In other words, the 2.5 per cent, three per cent loss

in the asset base. For that, they were paid millions of pounds. By

using bet that sector deserves your sympathy? You do not understand why

people will be angry? I think things go wrong and there have to

beat consequences. On one side, the bank is trying to gamble

effectively with with money to try and make more money. On the other

side, it is bidding to look after people. It is the other end of the

respect and and. They are trying to do but the best things is almost

impossible. There is a consensus that then is to be a firm Wall

between the casino operation of investing the bank's own money in

the Italy of -- utility operation of managing and looking after other

people's money. That has more of has been fought. We can hold

debates accountable and we should do, but we have to move on. You say

we should move on, but we haven't had accountability. No one has paid

back the money they have owned in the good news for the mistakes they

were making. We have people that were burning pensions whooping

Rapid great national institutions. Where is your anger, a dinner

understand we're not more annoyed In our business, we are quite

annoyed about it. A one of the jobs we have to do when quiet place how

many were thus is we have defined banks that we can rely on. That has

become remarkably difficult. Banks are not as safe as they once were.

The plain logic here is to choose a random act and get angry about it.

If someone borrows more money than they can afford to pay back from a

bank, it ceases to become their fault, it becomes the system's

I expect some poor person who is told they can afford to borrow

money, I'd get expect them to exert the same financial responsibility

of someone who's job it is to lend. There is an enormous amount of

suffering among people who borrow too much that and now struggling to

pay it back. They are suffering the consequences. Where is the

responsibility of the people who led to the money? There needs to be

responsibility in the system. If you have a system in which people

can make bets, and if the bats turn out well, they wind. If the bets

turn out badly, the taxpayer loses. Everyone who works at Lehman

Brothers for example has paid the price. Jobs of the mast,

reputations of the mast. Companies have gone. There have been enormous

amounts of distribution of pain in Is

why we are to tackle. -- systemic point is what we have to tackle.

you want to learn more about what we have talked about, or visit our

website. Let's talk about whether. What

finance gets up to whether it is socially useful or not. Hugh is a

theory. A lot of what goes on in finance is not like a car factory.

A car factory produces a car. If one car factory produces a car, it

does not displace another car that another factories producing. A lot

of what you guys do it is not about creating the extra car but a spot

in the car factory one step ahead of the other guy. It is less about

creating extra Valley and warned about securing your position

relative to someone else. He rather creative metaphor. Basically what

you are about is spotting talent and skill and profits. That is one

step removed from the creation of it. Is that there? The man or woman

who runs a car factory has to spot a gap in the market that his or her

cars can fill. In that context it is no different. I think

fundamentally when people invest, they are investing in a company or

organisation. It needs that capital to grow. Without that investment,

they would be able to. Financial- services are still trying to

produce products that customers want and need. You are providing a

service. Let's go back to the insurance example. Somebody wants

protection and somebody wants to have a mortgage and therefore the

banks will provide the credit for that to be done. There are other

things that are done that may be for an institution's own account

but what we're doing fundamentally is providing services and solutions

that the customer wants. We go bust if we're not thinking about what a

customer needs or might need. couldn't offer guarantees. It went

bust. You had to put a lot of money into it? Yes we did. Effectively it

handed back the premiums and said the insurance we're providing you

is no longer be provided. We stood by and it has been painful. We

provided guarantees for those customers and what we failed to do

was properly make sure we hedged and provided internally the right

resources. As the markets went down, we had to pump our own money in to

honour our guarantees to the customers. It has been very painful

to the group. You stood by all the promises? Absolutely. I'm not

saying all finance is a waste of time. The thing some of it is? For

example, very clever people working out complicated financial

instruments barely understood by other very clever people and buying

them at prices that are very hard to ascertain the accuracy are of.

Good work? Bad work? Hobbies the outcome of a competitive world

function in market what are these a distraction we would be better

without? They are a function of very clever people and I think your

argument holds, today prove worthwhile for society? I think it

has been proven they have not. There are still on -- still things

out there today that I'd still do not understand how they provide a

lot of wealth to society. Things like short-selling. That does not

feel right to me. And its usefulness to society sounds quite

limited. There are still activities out there... Anyone can sell

anything they like. If you buy something you don't understand, I

was on the board of a company in North America that had the shares

shorted by people who thought they could drive the business into panic

and to drive the share price down. It made the company and board

become ever more resilient against them. That company is now a multi-

billion dollar business. I don't agree. I think if you accept a

market concept their weakness will be a source of profit is some.

the people who had played very big gains in a complicated market,

should they all have gone past? They were all rescued by taxpayers,

Goldman Sachs who benefited hugely from the American taxpayer. Where

is that capitalist system, where is the justice in it? If you want to

think about one went wrong in the tack -- banking crisis is that were

reports taxpayer money into bailing out banks, it was not a good deal

for the taxpayer. The difficulty is you don't have time. You have to

make a decision. They know they are going to be rescued. That is why

they managed to be read so much money. The peace that comes Ford is

that we must make sure we get the right structure moving forward.

What about the culture of those who have worked in the financial

sector? That may suggest that one might like to deal with people who

deal in a sector where you take pride in what you're selling and

only sell something if you think it is good. Arguably what happened was

that they did not take pride in what they were selling and only

thought, can I get away with selling this legally? What t think

about the court to? The buyer has to be as intelligent as the seller

otherwise the market does not work. out of it. Any other asset they

will buy for resale. They have drawn this distinction between the

retail banking sector and the normal person. I am very relaxed

about that. My focus is on a try to turn something from nothing in two

-- into a multi- billion dollar value business. It is my fault if

somebody sells me something dodgy. Thank you. Ken Olisa, Ian Gorham