There is so much happening at the moment it’s hard to know where to start, so let’s kick off with the good, before moving to the cynical.

First up, hearty congratulations to Martyn Mead, who left Barclays, and, I understand, the FX industry, last week after four decades, the majority of which he spent at Barclays (there were eight or nine years at UBS in the middle). I rarely came across Martyn back in my trading days as there were few occasions when Cable traders wanted to talk to the dollar-mark trader, and vice versa! That said, I know plenty of people who have worked closely with him who have nothing but good things to say, and that was demonstrated by the huge number that turned up to see him off in style in London on Thursday. I am pretty sure Martyn can be seen in action in this famous video, which, if you haven’t seen it yet, you should! Good luck Martyn, the industry will miss you…I wonder if you will miss the industry?

I raise that rather cynical question because my second – and main theme of this column – concerns a report we ran a week or so ago reporting that HSBC’s former global head of FX Frederic Boillereau, was suing the bank and four senior managers, past and present, for unfair dismissal and claiming whistleblower status. I am told, but have not yet confirmed, that the two parties have settled out of court and assuming my information is right, it is, with my cynical hat on, undoubtedly the most sensible course of action for HSBC.

Boillereau’s time in charge of HSBC’s FX business took in three deals that became infamous as the FX industry underwent intense scrutiny of its practices. The first was a huge Cable transaction for Prudential that resulted in the dismissal of staff, the second the court case brought by ECU Group over the alleged triggering of stop losses and the third, and most infamous, the Cairn Energy transaction which has led to former HSBC head of FX cash trading Mark Johnson being convicted and sentenced to serve time in a US jail.

I am told, but again cannot confirm, that Boillereau refused to sign a Deferred Prosecution Agreement (DPA) that HSBC agreed with the US Department of Justice in 2018 in which HSBC admitted “front running” two client orders, one of which was the Prudential trade, the other is believed to be the Cairn Energy transaction.

It is hard to see HSBC’s signing of the agreement with the DoJ as anything other than yet another act of a bank throwing one hand up in guilt (just after signing a hefty cheque of course), while throwing a staff member under a bus with the other. In 2016 the Financial Times reported that an internal inquiry into the Cairn transaction, led by law firm Cleary Gottlieb found nothing wrong in the bank’s handling of the transaction, which I take to mean that it accepted the need for pre-hedging (and I think I have made it clear enough on too many occasions why pre-hedging was not just necessary but vital to a good execution). What changed then, for HSBC to sign an agreement just 18 months or so later, that agreed that pre-hedging was front running?

It’s just another example of how the banks have got this whole issue wrong. They have been too quick to roll over to the authorities without trying to explain how such large orders should be executed, and then equally as quick to find a scapegoat within their ranks to take the hit. This is not just about Mark Johnson and HSBC, it has happened at too many banks where senior management endorsed, even encouraged, behaviour that was seen as inappropriate some years later. I have no problem with sharing information in chat rooms being seen to be inappropriate, for example, my problem is in the lack of senior managers being held to account. A full hearing involving HSBC and Boillereau may have provided something along those lines.

I have no idea whether HSBC was playing a game of brinkmanship in this case, or whether it has other, genuine, reasons for not wanting to progress (I am reminded of Citi seemingly spending a fortune on lawyers to defend a claim with a maximum payout of £85,000 in the same tribunal as Boillereau brought his case). Either way, it is hard to escape the sense that an awful realisation may have dawned upon someone at the bank that the last thing it needed, given it had signed the DPA, were long drawn out legal proceedings that may not have shown that it acted in the best manner possible. As to what the four individuals named in the claim make of it, nobody knows, but it is hard to think they haven’t let out a sigh of relief.

I was looking back over this whole sorry conduct issue last week and the collateral damage is immense, most publicly in the case of Johnson, but also in the countless staffers who had their careers cut short but what turned out to be precipitate action on the part of their employers. What really worries me, however, is what I perceive to be the attitude of too many banks that the issue has been dealt with and business can carry on. Of course the business goes on, but too many people I talk to say that the surveillance function at the banks, after a couple of years of investment, has now gone onto the back burner. Jobs are not being filled and technology is not being updated because the banks need to be making money out of their markets’ businesses again.

My concern is that with more banks becoming brokers – as I discussed last week – then a surveillance function is incredibly important if we are not to go down a similar path again. I look at banks now settling unfair dismissal claims where once there was an instinct to fight them and I think of issues being swept under the carpet. I do not know for sure that is what is happening, it is just the “optics” to use the modern parlance.

We are meant to live in an age of transparency, but I fear the world is getting it wrong by focusing too much on transparency of market rather than what is really needed, transparency of action.

Twitter @lamboPnL

Colin Lambert

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