UBS European Conference 2014 Preview insights Pre-conference Interview with Bill Winters

UBS European Conference 2014
Preview insights
Bill Winters
CEO and
Chairman of
Renshaw Bay
Bill Winters, is CEO and Chairman
of Renshaw Bay, an alternative asset
management and advisory company
founded in partnership with Mr Johann
Rupert’s Reinet Investments and Lord Jacob
Rothschild’s RIT Capital Partners.
Winters left JPMorgan in 2010, having been
the Co-CEO of the JPMorgan Investment
Bank since 2003. He had joint responsibility
for the firm’s global businesses across sales,
trading, research, capital raising, lending and
associated risk management. Having joined
JPMorgan in 1983, he held management
roles across Markets areas and Corporate
Finance. He moved from New York to
London in 1992.
He was a member of the UK Independent
Commission on Banking, which made its
recommendations to the Government on
the structure of the UK financial industry in
September 2011. In late 2012 he completed
a review of the Bank of England’s liquidity
operations which was presented to the Court
of the Bank. He also acted as a specialist
advisor to the Parliamentary Commission
on the Banking Standards during 2012 and
2013.
Winters received an MBA from the Wharton
School at the University of Pennsylvania and
a Bachelor’s degree in International Relations
from Colgate University. He is a member
of the Boards of Novartis, the International
Rescue Committee, Colgate University, the
Young Vic Theatre and The Print Room.
Winters is a dual UK / US citizen. He was
made Commander of the British Empire
(CBE) for services to the Economy and UK
Financial Services in the Queens Honours in
2013.
Pre-conference Interview with Bill Winters
In a recent conversation, Renshaw Bay’s Bill Winters, a former CEO of
JP Morgan’s Investment Bank who has served on the UK Independent
Banking Commission, discusses a few themes that the panel will
explore:
You bring more than 25 years of experience in capital markets
and structured finance to the panel. How does that influence
your view of the lessons learned from crises past, and what
needs to be done to avert the next one?
It gives me a certain perspective on the imbalances that are building
up in the current environment. The topic of our panel raises the
question of how these imbalances will be dealt with in the next crisis.
What are some of the themes you expect to hear in the
panelists’ comments?
One of the themes I’ll put on the table is the question of how well
market liquidity has adjusted to the regulation that came after the
financial crisis. There remain significant structural liquidity problems
in the markets that have been masked by the fact that central banks
have been the providers of liquidity. At the same time, post-crisis
regulation and tighter capital requirements have had the effect
of reducing the market-making capacity of the banks. Issuance
has continued to be very heavy in this low-yield environment, so
institutional portfolios of securities are significantly larger than they
were just a few years ago. Those imbalances have implications for
our ability to manage through the next shock.
So you see the markets as structurally still vulnerable?
I’d expect that private markets would function very poorly if there
were an exogenous shock now. With diminished market-making
capacity, we have less of a liquidity buffer in periods of extreme
stress. Therefore, central banks would have to step in, in even more
extraordinary ways, not just in bond markets but all markets. Central
banks have put some facilities in place to do that, but some of that
intervention would have to be done on the fly. That poses further
risks to the system. When a response is made on the fly, there’s
“I’d expect that private markets
would function very poorly if there
were an exogenous shock now.”
always risk that it’s either
inadequate or excessive.
because they are always the most
important link in the chain. They
concentrate on developments that
could impact the banking system,
rather than things that could
impact the economy more broadly.
But the issues in a crisis go beyond
the banks themselves.
extending state support and
introducing moral hazard to profitseeking entities is going draw
criticism. Central banks will always
What other issues should be
have a role providing for smoothly
part of a discussion on dealing
functioning markets in a crisis but
with the next crisis?
this must be balanced against the
dangers or moral hazard. While it
My second theme would be
will always be possible that some
“shadow banks” - or non-banks
Are you saying policy makers
market participants may benefit
- the risks they pose and how to
need tools to deal more broadly disproportionately from state
deal with those risks in the event
with a crisis?
intervention in a crisis, it is critical
of a financial shock. The Financial
that intervention mechanics are put
Stability Board and other relevant
in place ex ante that are designed
authorities have said they’re looking Yes. Contrasting the US and
European experiences in the crisis
to avoid benefiting individual
at non-banks that engage in
market paticipants.
extensive maturity transformation, is a useful exercise on this point.
Banks are just not that important
ones that are excessively or highly
Panel Information
in the U.S. to the functioning of
leveraged, and non-banks that
the macro economy, so when
are so big as to cause potential
Financial Crises Past: Lessons for the
things really started to get ugly
problems. So they have reviewed
Future’
the Fed quickly realized that simply
a selection of Asset Managers
liquifying the banks wasn’t enough. “Financial Crises Past: Lessons for the
but none have been identified as
They needed not only to liquify
systemically important financial
Future” will be the focus of the lead panel
on the first day of the UBS European
the banks but also to inject money
institutions as of yet.
Conference in London November 11-12.
directly into the commercial paper
market, money market funds,
What have they done so far in
Moderated by Myles Wright of UBS, the
directly into the insurance industry.
this area?
panel will bring together an impressive
And they needed to be buying
group of academics and experienced
It’s important to note that the bulk nongovernment bonds outright
executives in banking and capital markets:
of regulation in this area has come in order to protect the financial
• Bill Winters, CEO of Renshaw Bay, an
system as a whole and to protect
through the regulation of banks’
independent asset management firm
the macro economy.
dealings with non-banks, rather
• Dr. Nouriel Roubini, Chairman & Cothan through the direct regulation
Founder of Roubini Global Economics
How did that compare with
of them. The Financial Stability
• Prof. Richard Roberts, Professor of
Contemporary Financial History, King’s
European response?
Board made a statement recently
College
about minimum repo haircuts,
• Athanasios Orphanides, Professor of
Generally, the Europeans didn’t
probably the first important step
the Practice of Global Economics and
do that. The UK had a modest
that is really targeted at the nonManagement, MIT
corporate bond-buying program,
banks themselves. But the rules
• JamEs Aitken, Partner, Aitken Liability
only apply to the banks’ financings which was effective in bringing
Advisors LLP
• Simon Smiles, UBS Wealth Management,
spreads down to manageable
with a non-bank, not directly to
Chief Investment Officer
non-banks. There’s also been a lot levels. But basically the Bank of
England, the European Central
of focus on banks’ transmission
Visit the UBS Conference website for the
channels, such as prime brokerage. Bank and even the Bank of Japan
latest agenda.
don’t have the tools to intervene
That’s been the theme so far. In
terms of focus on “shadow banks” in markets beyond what they can
Follow @UBSemea #UBSeuroconf to find
out more and follow live updates during
themselves, there has been a lot of provide the banks directly. That’s
the conference.
changing. It has to change.
discussion, but no action.
What are some of the reasons
for that?
What’s the biggest challenge to
making those changes?
In every crisis, I think the regulators
focus at the outset on banks
These are politically difficult
issues. Any suggestion that you’re
*Subject to change
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