Commentaries

Now raising intellectual capital

Sir Win FTW at Lloyd’s Banking Group

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It’s good to hear that Win Bischoff has a list of priorities in his new role as chairman of Lloyds Banking Group <LLOY.L>. Reviewing the position of chief executive Eric Daniels is apparently not at the top of it.

So what should he be doing when he formally takes the chair on Sept. 15?
 
The first thing is to accelerate the integration of HBOS into Lloyds. The group needs to stop dribbling out restructuring announcements (a few job losses here, a few there) and come clean about what it needs to do to secure the synergies that were promised from this ill-starred transaction.

True, promising to cut tens of thousands of jobs in the middle of a recession would be politically unpopular. But it would allow Bischoff to argue that Lloyds is doing what needs to be done in the interests of taxpayers, who own a large chunk of the bank. More importantly, it’s the single most direct thing he can do to drive up the share price.

Second, he needs to shepherd Lloyds through the European state aid process more or less intact. If the Commission forces it to make significant disposals, Bischoff needs to ensure that the group has plenty of time in which to make them.

Indexing the elite’s creditworthiness

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This isn’t such a good sign for developed nations. Markit, the administrator of popular credit derivative indexes, has created another long-winded index, the Markit iTraxx SovX G7, to track the ups and downs in default risk perceptions of elite industrialized nations.

Sure, the index is part of a suite of indexes that will track the sovereign risk of other nations, but its inclusion is symbolic of how far developed nations like the US have fallen. I remember one journalist being heckled after he raised even the prospect of the US losing its AAA status a few years back. Now you can’t get away from the back and forth debate of ”is it or isn’t it worthy.”

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