Top City lady tipped to become CEO of once-powerful FX giant

Will the prime brokerage giant get its market share back with two leading ladies at the helm?

London, Canary Wharf from Thames

The challenge of regaining the market share lost to equally ferocious giants in such a highly competitive business sector as the interbank FX business is not one to be taken lightly.

There has been a seismic shift in market dominance over the past year, which has resulted in non-bank market maker XTX Markets becoming the number one global FX dealer in terms of market share, ousting the major banks from the top slot once held by Citigroup for over 14 years.

This demonstrates that the non-bank electronic FX business is now so finely tuned and has matured into a state of dominance, with its own dedicated systems being more efficient than the lumbering banks which have now to deal with the dinosaur effect.

RBS, and its FX dealing and investment banking division NatWest Markets, is no exception, having languished in 19th position worldwide for global FX market share by the end of last year, down from third position just a few years earlier, following its long term censuring by the government for its part (along with other banks) in LIBOR and FX benchmark rigging which has curtailed the bank’s interest in investment banking growth and committed resources to paying fines to regulators instead of doing forward-looking business.

Combined with Citigroup’s report in 2015 which stated that its risk management division considered OTC derivatives counterparty credit to be a liability that is likely to result in 56% default ratio, and the ultra-conservative line was taken, halting liquidity agreements to anyone with less than $100 million on their balance sheet, and even then any potential deal was handled with trepidation.

Two years ago, FinanceFeeds met with RBS at the bank’s Bishopsgate head office in London, and was told categorically that they now want our business back, and are very much open to extending prime brokerage services to the FX industry, which was a welcome departure from the reluctance that many firms have encountered when approaching banks for agency execution facilities.

This week, with that gloomy backdrop, RBS has turned a corner, which may well be the road to its rejuvenation as an FX mainstay, this time by considering replacing its outgoing CEO with the bank’s first female leader, Alison Rose.

Ms Rose, one of the most senior women in the City, is regarded as the frontrunner within Royal Bank of Scotland to succeed the chief executive, Ross McEwan, when he departs within the next 12 months.

The 49-year-old senior executive has kept a lower profile in recent years than other City high flyers such as Nicola Horlick and Dame Helena Morrissey, but is highly regarded in the banking industry.

Already the most powerful woman in UK banking, Ms Rose would be the first woman to run a major UK bank, and this would place RBS as the only bank in the world with the two top positions held by women as the COO of the firm is also a lady.

Late last year she was appointed deputy CEO of NatWest Holdings, the “ring-fenced” part of RBS which excludes the riskier investment banking business. It is the largest part of RBS and in this role she deputises for McEwan when he is away and leads on key strategic projects, and also runs RBS’s commercial and private banking business, which includes Coutts.

Ms Rose recently concluded a Treasury-commissioned review of female entrepreneurship, which found that only one in three UK entrepreneurs is female and just 1% of venture funding goes to all-female teams.

Rose, who lives in Highgate in north London and has two teenage children, was the only woman in the boardroom when she attended her first meeting as a senior RBS executive. She is passionate about improving equality and diversity in the boardroom and promoting female entrepreneurs, but does not favour boardroom quotas which she regards as too blunt.

When NatWest was taken over by RBS in 2000, Ms Rose was working in investment banking and later rose to be RBS’s head of leveraged finance in the UK and Europe, and subsequently head of markets and international banking in Europe, the Middle East and Africa.

She was involved in restructuring the bank’s balance sheet after the financial crisis of 2008, when RBS needed a £45bn state bailout as a result of the feckless wrongdoings of at-the-time leader Fred Goodwin, who got away with his misadventures scot free.

Since Fred Goodwin’s monumental disaster, which led to the collapse of RBS, the bank has struggled with losses, boardroom discourse and regulatory probing until it got itself back on its feet in the middle of this decade.

Alison Rose (Photo: The Guardian)

The bank views London as its absolute home and is not going to Europe under any circumstances. Therefore, Ms Rose, if elected, is charged with building its electronic trading business.

Indeed, if it can be deduced from the aforementioned FinanceFeeds meeting with RBS in the Square Mile that the company is absolutely willing to do business with OTC prime of prime brokerages, then it would certainly follow that last week’s round table in Broadgate which FinanceFeeds attended and was hosted by a major interbank FX dealer that handles over 12% of the world’s FX order flow included proponents of the OTC sector (including me – Ed). This demonstrates further that the banks are holding their hand out once again. Of course, criteria will still remain strict, but the OTC business is something they want.

The largest British banks in terms of interbank FX order flow are Barclays (via the BARX platform), with 8.11% of the global market share, HSBC with 5.4%, RBS with 3.38% and Standard Chartered with 2.4%

Clearly, risk management – namely the possibility of ‘going upside down’ on large prime brokerage accounts due to extending counterparty credit to spot FX companies that are placing trades in a highly liquid and volatile market – is one factor that has given the banks a reason to retract recently, but the other is compliance. If banks give counterparty agreements to all brokerages, they would be responsible for “Know Your Client” and “Anti Money Laundering” reporting to the prudential regulator and probably the non-bank regulator on the brokerage side.

This is all well and good, however it does not make money. Perhaps the banks have realized that missing out on such a huge part of their revenue stream is simply not commercially sensible, and are coming back to a now very well organized FX business in order to gain from it.

The executives that FinanceFeeds met at the company’s head office, along with its NatWest Markets division, show a very distinct interest in fostering prime of prime relationships with non-bank entities, as long as the relevant (and extensive!) due diligence is completed.

I followed this up with some London-based prime of prime brokerages, and it appears that most certainly, RBS has the lowest entry barriers and is actually willing to do business as a Tier 1 counterparty. The bank realizes that London’s prime of prime sector is very well organized and is operated by large, well-backed corporations and in some cases hedge funds, and that the rules are followed diligently, hence its willingness to open its doors once again.

This should be a good basis for Ms Rose’s leadership, as she is very much an expert in leveraged finance.

Ms Rose’s potential appointment represents a drive toward hiring female senior executives in London, especially in order to avoid the wranglings with the law and build on the innovative and technological direction required by today’s banks.

A recent example of this was the appointment of Debbie Crosbie by TSB.

In 2017, the foundation was laid by former CEO Paul Pester for a movement toward technologically led effort to create a more modern and accessible user experience for customers. “We’re getting set to move to our brand new, state-of-the-art digital banking platform towards the end of the year. Changes are already afoot for our customers with the launch of our new mobile banking app in April, and last week we were the first bank in Europe to announce a partnership with Samsung to integrate iris recognition into our mobile app” he said at the time.

Now, just a year and a half later, during a time at which ladies are being appointed as senior leaders of many banking and financial technology institutions across London – Lloyds and Santander have also got plans to appoint female leaders very soon, and RBS’s new COO Katie Murray took up her post at the beginning of this year – the need to move toward access to markets for retail customers is being addressed.

Debbie Crosbie

Ms Crosbie was instrumental in developing CYBG’s new operating platform following its stock market debut, as well as the migration of 2 million customers from its “pre-existing archaic underinvested platform”.

This has been noted by several professionals across London. “Pretty useful experience in the context of TSB’s own migration issues” said John Cronin, an analyst at stockbroker Goodbody.

The bank is still working on some IT fixe executives considert that TSB was nearly out of the woods and was now ready to launch new products – including a new business banking service – for the first time since April.

“Although we still see occasional IT issues and interruptions, the number of these incidents is significantly down and now in line with the wider industry,” TSB Chairman Richard Meddings said. More than 118,000 complaints have now been “fully resolved”.

In today’s tech orientated world, IT failures are disastrous for financial institutions, not only wreaking havoc but also creating distrust among customers who for the most part now see banks as electronically operated entities, especially in Britain where new retail-orientated firms such as Transferwise, Revolut and Robin Hood are taking a totally mobile-only service into retail customers with no branch infrastructure at all.

Margaret Thatcher once said “If you want something said, ask a man. If you want something done, ask a woman.”

She may posthumously be proven right.

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