When I look around this great room, at so many familiar faces, I can’t help but feel that many of us have been in the spotlight recently. Rather too much so, for my liking.
For in all my years I cannot remember a time of such prolonged public obsession, if that is the right word, all around the world, with financial services, and nearer home, with the City of London. It is a year, almost to the day, since the fateful collapse of Lehman Brothers, and the shockwaves which that sent around the world’s financial markets. Yet, we are all still feeling them very acutely today in real economic terms and in the sound and fury of public debate.
In election campaigns from the United States to Germany and Japan, concerns about financial services have loomed large. Bankers have become hate-figures. Financial services has been indiscriminately demonised and the so-called Anglo-Saxon capitalism has come under sustained attack.
Arguments are raging about limiting pay, curbing bonuses, restricting financial activities. Some are even arguing that the financial sector in the UK is too big and needs cutting down to size. That it is not “socially useful” and therefore we can dispense with parts of it. That the so-called “real” economy is somehow superior and morally better.
Ladies an gentlemen, I think this is dangerous talk.
Clearly some parts of the banking industry have behaved irresponsibly. There needs to be significant change in both the regulation and governance of the banking industry to prevent a repetition of the excessive risk-taking and greed that has helped cause so many of today’s problems. There can be no going back to the bad old ways. But this has been a global, not just a British, phenomenon - and it involves only a part of the financial industry.
It is certainly not a reason for politicians and policymakers to start undermining the UK financial sector - which is one of this country’s great national assets. There is a very real danger that we shall end up doing irreparable damage to one of the strongest sectors of our economy.
I am proud to work in the UK financial services industry. And I am proud to be a part of the City of London. Why? Because financial services are something at which we British excel. Why do so many of the brightest people from around the world come to work in the City. Why do corporations, institutions and governments around the world bring their money and their business here?
Because we offer something unique – an unrivalled mix of skills, a dynamic environment and a proven ability to adapt and evolve. In short, the City is a world-class place to do business.
The United Kingdom is an international leader in financial services – a high value-added part of the global economy – and that gives us a tremendous competitive advantage.
Furthermore it is nonsensical for politicians and others to suggest that the UK financial sector is somehow ‘too big’ for the UK economy when much of the business conducted in the City is international business, servicing international clients.
It has no bearing on the UK economy except – and this is absolutely crucial – that much of the value added remains in this country.
The City, and financial services more generally, are vitally important to the United Kingdom economy, to United Kingdom employment both directly and indirectly, to government revenues and to UK pension funds. United Kingdom financial services employ more than one million people – and more than two-thirds of those jobs are outside London. Financial services in this country account for about 8 per cent of national output and contribute some 14 per cent of total tax revenues.
Which is why, when I hear some people questioning whether the competitiveness of the City and the wider financial industry should be a priority for the UK, I shudder. I spent a year as Lord Mayor of London banging the drum for our number one competitive position as has each succeeding Lord Mayor. This is the one industry where we are world beaters. We must regard this continuing competitiveness, in a ruthlessly competitive global market place, as an absolute priority.
Can you imagine the French, the German or the Swiss governments questioning the importance of the competitiveness of their wine, automotive and pharmaceutical industries? No…. neither can I.
Maintaining the competitiveness of the City, and of UK financial services, in the years to come has to be central to our ambitions, and therefore central to the current debate about how best to rewrite the financial rulebook.
Competitiveness demands excellence, and continued excellence requires constant change and evolution.
This has to be our priority now. Not knee-jerk reactions, pandering to populist outrage or driven by ideological opportunism, as is the case with the proposed EU directive on alternative assets.
But before I talk briefly about what lessons Lloyd’s may offer those pondering the necessary reforms, we should remind ourselves of one very important thing. People keep talking about the problems of financial services, as if we all do the same job, as if everyone is an accursed banker. This is a hugely diverse sector, much of which had nothing to do with the credit crunch and its excesses. Let us be careful, and measured, in our remedies, so that we do not damage healthy and vibrant sectors, of which insurance is top of the list.
But let me end with a brief word about Lloyd’s, because, not too immodestly, I do think there are things to be learned from our experiences. Some twenty years ago, largely because of our own follies, Lloyd’s had our own ‘near-death’ experience. We found salvation partly by off-loading toxic liabilities into a separate vehicle, Equitas – a mechanism we are now seeing repeated with banks around the world – but also, and most importantly, by embarking on a period of profound change.
This involved improving risk management and transforming our culture, instilling new disciplines and a longer-term perspective, while nurturing our capacity for innovation and entrepreneurialism. We have also lobbied hard for equal treatment with our peers and I am grateful for the tax measures that the Treasury introduced last year that brought us into line with other UK companies. Today, happily, Lloyd’s is stronger than ever, its brand highly-respected across the globe.
This must be our aim for two other great brands – UK financial services and the City of London. They are battered and bruised. But their fundamental strengths, and their vital importance to our economy, remain. In the competitive world in which we all operate, it is vital we take the right steps to restore these brands to their former glory.
Ladies and gentlemen, it gives me great pleasure now to introduce our guest speaker for this evening.
James Wolfenson has had a unique career in finance both commercially and within government. He was born in Australia and after studying law, completed an MBA at Harvard. He held a series of senior positions at international investment banks such as Salomon Brothers and Schroders before setting up his own investment and corporate advisory firm in 1981 to work with major U.S. and international corporations.
He then moved to take up one of the most important global government roles: the ninth President of the World Bank. During his ten year tenure, he travelled to more than 120 countries in order to pursue the challenges facing the World Bank in regard to poverty and environmental issues. He led successful initiatives on debt reduction, environmental sustainability, anti corruption programs, and AIDS prevention and treatment.
In 2005, he was appointed as the Special Envoy on the Middle East and played an instrumental role in co-ordinating Israel’s planned withdrawal from the Gaza Strip and spearheaded reconstruction efforts.
Currently he is Chairman of Wolfensohn & Company, a private investment firm which advises corporations and governments and is Chairman of Citi International Advisory Board.
Jim: thank you very much for coming and we greatly look forward to hearing your address.
Ladies and gentleman, thank you.
