Creditflux Newsletter

The argument against transparency is lost. But this defeat can help us win more important battles

Ring the bells! Financial armageddon has been averted and all is well in the world of credit. It feels very like 2002, with investors Wolseley has never heard of beating a path to the market. As UK prime minister Margaret Thatcher said outside Downing Street when asked a detailed question after victory in the Falklands War: “Just rejoice!”

A good time then for Wolseley to scour the horizon for dark clouds. The biggest and darkest are those coming from various regulatory authorities. Look west and it’s the Geithner plan, look east and it’s that cumulonimbus the de la Rossiere plan. And to make sure we are truly dizzy lets not forget the UK’s King plan and its opposite, the Darling plan. The credit market sky is full of dark clouds.

 Off to Her Majesty’s Treasury to lobby some of the mandarins that matter. The great and good of our industry (only one representative per firm please), crammed into a room usually reserved for naughty ministers from departments that spend too much. The Treasury, the FSA and the Bank of England are on good form. A brief precis of their stance is: “Come on credit team, we’re on your side, please arm us with all the very best arguments to help us drive away the regulatory dark clouds from Brussels and elsewhere.” And the response from our side? Feeble!

Wolseley claims no lobbying expertise but here are a few suggestions. As an industry we have to pick arguments we can and must win. There is little point trying to make a stand against increased transparency in the market. If I hear one more otherwise sensible credit trader talk about the negative impact of Trace on the US market I will burst into tears.

Friends, I tell you in all candour we have lost that argument. We all need to get used to saying “transparency is good”. “How much transparency would you like Mr Regulator? Only that much! No please have some more.” Only if we concede this point can we hope to win elsewhere.

If credit products are open and transparent, what is there to fear from them? Even the most sceptical French socialist must see that concentrations can’t build up in dark corners if there are no dark corners. If we embrace transparency then we have the arguments we need to counter the “ban all derivatives” calls that have gained traction in some quarters.

What is depressing about these consultation sessions is that large firms in our industry have professional lobbyists who know the mandarins. They have the relationships, but not the product knowledge or the ears of key decision makers within their organisations. Other firms are represented by senior people, doyens of the market who have detailed knowledge, but who are also often ultras who refuse to concede any ground (and who, worse still, patronise the mandarins).

We have to get our collective lobbying act together. Pick your preferred organisation and engage with it. This should be a high priority for every firm.

In this context Wolseley is sad to hear that George Handjinicolaou has resigned as European head of Isda to take up an important role in the financial markets back home in Athens. George fought stoutly for our markets as no doubt Isda will continue to do.

It is vital for us to find a worthy successor: someone who commands the respect of market participants; someone who can rapidly gain the trust and respect of regulators in Brussels and around Europe. So please take a minute to search your rolodexes and your databases for appropriate names.

Wolseley is a leading practitioner in the credit market. Feedback is welcome at wolseley@creditflux.com