Shocks & Stares » Financial crisis http://blogs.hillandknowlton.com/shocksandstares H&K\'s Financial & Professional Services Team Blog Tue, 19 Mar 2013 08:00:56 +0000 http://wordpress.org/?v=2.9.2 en hourly 1 The acceptable face of economic debate? http://blogs.hillandknowlton.com/shocksandstares/2012/04/the-acceptable-face-of-economic-debate/ http://blogs.hillandknowlton.com/shocksandstares/2012/04/the-acceptable-face-of-economic-debate/#comments Wed, 04 Apr 2012 11:18:01 +0000 Edward Jones http://blogs.hillandknowlton.com/shocksandstares/?p=632 THIS POST IS BY JOSHUA GLENDINNING

Angela Knight, head of the British Banker’s Association, is to step down after five years at the helm of the industry body. Knight has led something of a charmed life in what would be seen by many as an invidious position in an adverse political climate for the financial services sector. While the former Tory MP doesn’t garner respect from all political quarters, she is certainly admired by many within the financial services sector for her ability to speak on behalf of the industry. According to The Guardian, she has given over 800 broadcast interviews, and travelled over 14,000km to and from Brussels alone since 2006. For those working in the City, it has been preferable to have such a shrewd political operator speaking on their behalf rather than having to face the ire of public opinion themselves

Knight’s time at the BBA has been indicative of a broader trend within politics and the media. Despite frequent media brickbats, those within the financial services sector are often far better able to carve themselves positions of political and intellectual authority than many other would-be commentators. Ultimately, the BBA is little more than a lobbying organisation for its members and yet Knight has been able to assume an air of authority within the media which would not be accorded to many others in similar positions.

For example, Unite General Secretary Len McCluskey may have been making political waves this week but he is unlikely to be asked on most news programmes to talk on subjects that don’t explicitly affect his members. (Incidentally, for an interesting insight on the man who appears to have the ability to turn the government and subsequently the public into Corporal Jones from Dad’s Army, listen to Profile on Radio 4). Knight, on the other hand, has been frequently asked to discuss broader social and economic issues, as well as more obvious areas such as the reform of the banking sector.

The financial crisis (or perhaps Robert Peston) has increased public interest in the financial services sector to a level previously unseen. However, outside of personal finance, many commentators in possession of a sufficient degree of technical knowledge are also industry insiders. The adversarial exceptions to this rule (for example, here and here) lack experience at conveying their views to the new audience which has invaded their previously arcane and quiet cloister of political debate. Unlike construction, manufacturing or even many service industries, the products of financial services are almost entirely intangible and the sector is therefore assumed to be too complex or too boring for most people to understand. The upshot is that media discussion is divided between either popular yet infantile anger or sophisticated yet sterile analysis.

‘The acceptable face of British banking’ may not be missed by all, but the reputation she has built for herself is certainly instructive for any company or organisation wishing to make an impression on the media.

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Europe’s troubleshooter takes on his latest challenge http://blogs.hillandknowlton.com/shocksandstares/2012/03/europes-troubleshooter-takes-on-his-latest-challenge/ http://blogs.hillandknowlton.com/shocksandstares/2012/03/europes-troubleshooter-takes-on-his-latest-challenge/#comments Mon, 19 Mar 2012 13:23:12 +0000 David Chambers http://blogs.hillandknowlton.com/shocksandstares/?p=596 THIS POST IS BY SALLIE BALE

Andrew Gowers, former Editor of the FT, is the man who claimed in 2005 that there is no future in print media, wrote a review of intellectual property for Gordon Brown, was once described by The Telegraph’s City Editor as “our man in a disaster”, was the head of media at BP during the Deepwater Horizon Crisis, and was previously Head of Communications at the ill-fated investment bank Lehman Brothers.

With a CV like that, he is surely the best choice to restore the battered reputation of Europe’s banking industry, isn’t he? Well, Reuters reported earlier this month that the Association for Financial Markets in Europe (also known by the slightly snappier acronym AFME) has appointed Gowers as their Director of External Relations in an attempt to reverse the increasingly negative public perception of the banking industry.

Financial industry body, AFME has a new troubleshooter

It would appear that Gowers has the experience to deal with big name players in crisis – but commentators question whether he is actually capable of success. Obviously the difficulty here is that by their very nature successfully-managed crises are not high profile and so we must look at other measures of success for those crises that are played out in the media.  How quickly and cleanly the company or organisation comes out of a crisis and is able to rebuild trust and reputation is perhaps a better measure.

Lehman Brothers is no more and not remembered fondly and BP is still struggling to regain lost ground. That said the crisis communications industry learnt a great deal both from the failures and successes of the BP Deepwater Horizon episode and hopefully for AFME, Gowers did too.

There is much to be learnt from BP’s Deepwater Horizon incident in 2010, and Gowers will be able to apply these learnings to AFME. Many commentators believe that the biggest obstacle facing the BP communications team was the legalities around what they were able to say, resulting in a ‘too little too late’ situation.

There are so many avenues that this journey could take; will Gowers pick a spokesperson to give the intangible concept of “The Bankers” a human face? Will he advise them to express empathy for what has happened in the past five years? Or will he just soldier on with the task of tackling the endemic structural failures of the European banking system? Will he go to where the people are and use social media to re-connect the masses with the banking industry? Would that work?

It will be interesting to follow his progress and see how his strategy will play out in the coming months, or more likely years. He has already spent three months as a consultant for AFME helping edit the AFME book Investing in Change, and so should be able to hit the ground running.

Is this the biggest challenge in Gowers’ career so far? Trying to increase transparency, please many diverse stakeholders and implement meaningful change is going to be a perplexing test for banks across Europe, but the task of communicating those changes to the European public and demonstrating that they have worked is arguably the greatest challenge of all.

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Rating Rhetoric http://blogs.hillandknowlton.com/shocksandstares/2012/02/rating-rhetoric/ http://blogs.hillandknowlton.com/shocksandstares/2012/02/rating-rhetoric/#comments Tue, 14 Feb 2012 14:02:22 +0000 David Chambers http://blogs.hillandknowlton.com/shocksandstares/?p=530 This post is by Marie Cairney, an Associate Director in our Financial and Professional Services team:

Only a few years ago rating agencies were being lambasted by investors, financial institutions and governments alike for their role in the unholy financial mess of 2007-2009. Prior to the crisis, trust in the Big Three agencies ratings on corporates, financial institutions and mortgage-related securities was high. This created a world where investment decisions were more or less made based on a couple of letters of the alphabet. Credit crunch finger-pointing blamed institutionalised ‘bad calls’ on the part of rating agencies as a major factor precipitating the crash. Blaming someone else for allowing you to do something that you knew was inherently stupid never looks good but a lack of transparency and competition in the ratings industry made the agencies a valuable commodity in the scapegoat market and let’s face it, they did get it wrong even if it was along with everybody else.

Ratings agencies assigned 'AAA' designations to exotic securities pre-2007, which led to a bubble of investor confidence in these products (Image: CNBC)

Fast forward five years and rating agencies are still here and still apparently creating mayhem; this time in the sovereign debt markets. Perhaps determined not to get it wrong again, they are all over Eurozone and US deficits and debt. Instead of building faux-investor confidence though, they are, according to beleaguered country governments, wrecking it. Damned if you do, damned if you don’t one might think.  “It wasn’t me, it was them” seems to have been replaced by “It’s not fair” as the key criticism of rating agencies in the global financial playground, with successive Prime Ministers, Presidents, and Chancellors publicly livid with their new grades.

Apart from the UK that is – we by comparison seem to be delighted. For political propagandists a downgrade to negative seems to have been manna from heaven. Akin to a hypochondriac saying to his doctor, “I told you I was dying”, George Osborne is positioning Moody’s downgrade as a renewed wake-up call which is doing us all a favour and further supporting the now pervasive gloom and his proposed cure. Meanwhile Ed Balls also jumps on the downgrade as an “I told you so” opportunity; but chooses to ignore the detail of Moody’s prognosis and instead concentrates on the visible symptoms; i.e. a lack of growth. Knowing that he doesn’t have an alternative cure for the disease, Balls seems to be saying that if had we applied the financial stimulus equivalent of Savlon a couple of years back, we might not be so itchy today. Still on our deathbeds, but not quite so itchy.

Moody's threatened to downgrade the UK's debt last night, though politicians seem to have taken the news rather well (Image: IndiaVision.com)

What can we conclude from all this? Well, one sovereign’s financial ruin seems to be another’s call to action. But love them or hate them, right or wrong; rating agencies appear to be here to stay, here to influence and here to be heard. But only if we listen to them…now there’s a thought; collective deafness…

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FPS’ Friday Fiver http://blogs.hillandknowlton.com/shocksandstares/2011/11/fps-friday-fiver-25/ http://blogs.hillandknowlton.com/shocksandstares/2011/11/fps-friday-fiver-25/#comments Fri, 04 Nov 2011 18:07:33 +0000 David Chambers http://blogs.hillandknowlton.com/shocksandstares/?p=398 Happy Friday afternoon everyone. The clocks have gone back, it’s dark outside, and the eurozone still doesn’t look any closer to salvation. Light relief does at least come however with the prospect of a good fireworks show this weekend. Before you get out the sparklers though, take a look at the Financial and Professional Services Friday Fiver below, which this week takes in a wide range of topics on everything from Bob Diamond to celebrity marriages. We hope you enjoy!

WE’RE GROWING!!! SORT OF…..Finally, some good news this week as the UK economy grew 0.5% in the third quarter of 2011. Compared to recent efforts, that’s practically a meteoric rise, and was ahead of City expectations.

But here’s the bad news though – the effect may not last for two reasons. Firstly, some of the rebound in growth is being attributed to the disruption in Q2 owing to that dress and the ensuing two week holiday that most people took to get over it. And secondly, the forecast ahead looks dire – the latest purchasing manager indices, released by our client, CIPS, nosedived this week, suggesting order books are drying up. Still, let’s enjoy a bit of growth while we can shall we?

SING SONG TO AN ATHENIAN RHAPSODY…..We’re viewing Europe’s sovereign debt issues through a musical prism this week. The debt odyssey has taken a number of twists and turns, the most unexpected of which was Greek Prime Minister George Papandreou’s call for a referendum on the latest bailout package. The brinksmanship proved a step too far and was quickly called off.

Disappointingly, the on-going crisis has meant that Italian Prime Minister Silvio Berlusconi has been forced to delay the release of his latest CD of love songs. On first inspection, readers would be forgiven for mistaking the article as an April Fool.

It’s good to see the City is keeping itself busy and Alphaville was the recipient of a cleverly penned version of Queen’s Bohemian Rhapsody set against the backdrop of recent events. Click and enjoy!

MORTGAGE DÉJÀ VU…..In 2006/07, people in America stopped paying their monthly mortgage bills. Many of them simply got up, left their houses and never came back (due to a wonderful quirk in US rules on home ownership they had very little obligation to stick around). Once enough people had walked away, banks realised that they were sitting on a pile of worthless housing stock that they couldn’t sell. Once that happened, banks who had bought mortgage loans off of other banks (neatly packaged up like a mince pie in lovable ‘CDOs’) realised they too were sitting on potentially worthless debt. Panic ensued, and we’ve been struggling to recover ever since.

Old news by now isn’t it? Probably not worth noting then that today’s FT reported that US state-backed mortgage company Freddie Mac has requested an extra $6bn from taxpayers because “homeowners were falling behind on their obligations and it could not count on mortgage insurers to reimburse the company for losses”. Or that US house “sales are down, delinquencies are rising and the pipeline of seized homes due to flood the market is growing ever larger”. Nope, not worth noting at all.

SLEB WATCH…..One for our celebrity interested readers at the request of our resident pop-culture queen, Helen Searle. Yes, in case you weren’t convinced, HuffPo’s title is eager to underline this IS an INFOGRAPHIC of the shortest celebrity marriages in homage to Kim Kardashian’s filing for divorce this week (your author this week isn’t sure who that is either). Although it could also be described as a bar chart, either way, our sleb watchers rather like it.

GOOD WEEK/BAD WEEK…..Whisper it, but it’s been a relatively good week for Barclays boss, Bob Diamond. His company’s results were better than most of its peers (though again the use of some accounting wizardry perhaps hid the true picture), and Diamond also faired rather better in media interviews than he did last time he mentioned the word ‘remorse’.

On the flip side, his banking compatriot at Lloyds, Antonio Horta-Osorio, faired far worse. No one should ever work so hard or endure such stress that they have to take a leave of absence to recover. Not ever. We hope he gets well soon.

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