I had thought about going to a Canadian Bank, as I was quite well equipped for trading Canadian Dollars but in the end, I went to work for a start-up situation (as we would call it now). This was a joint venture which had been created by Bank Julius Baer in Zurich in conjunction with a UK based finance company called United Dominions Trust. I didn’t know very much about balance sheets and bank trading limits coming from the District Bank. We pretty much dealt with most banks so my appreciation of credit worthiness was limited to a few absolute no-no counterparts. I soon found out different!
The bank was owned 50/50 and had a massive £500,000 capital. This is the equivalent of about £8,000,000 in today’s money so not as bad as it seems but, in retrospect, not good. I had an interview with the Managing Director – Henri Jacquier – and the Manager – David Mann. Jacquier was known to me as he had been Treasury manager of Klienwort Benson, a well know merchant bank and was widely known in market circles but David Mann was an unknown to me. He came from Hill Samual and had made his mark in the more traditional finance areas of merchant banking. The interview seemed to go quite well but I wasn’t confident because they didn’t have any dealers working for them and I was only 23 years old so the likelihood of me becoming their only dealer seemed very remote.
Remember that I was earning around £800p.a. at the time and that Valerie’s salary brought our total up to around £1,500 p.a. Thus, when I received a letter from them not only offering me the job but also offering me £1,500 p.a., I was amazed. Their letter, signed by David Mann, turned out to be typical of him in that it contained a lot of talk that turned out to be hot air. He wrote that I was to have the job – fair enough – but that I would also be paid to sit exams which would make it possible for me to operate in the world of the Stock Exchange. This was something that I knew little about (apart from what I had learned in my banking exams) so it sounded quite exciting. In true David Mann fashion, it never came off.
I took the job but, when I resigned from the District Bank I found out that I was quite liked there and that my leaving came as a disappointment to them. Still, I explained that I needed the extra money as I wanted to buy a house and expected to start having children soon. Plus, I was aware of the forthcoming merger of the three banks into the National Westminster Bank and expected that we, as the smallest unit, would get little consideration when it came to handing out jobs. As it ended up, I was partially right in that my boss, John Botevyle, ended up outside of trading and Peter Johnston spent his whole time at NatWest as No.2 on the DM desk. Not quite what I wanted. The other thing that was pointed out was that we would have to give up the bank flat in Watford and find somewhere else to live. I knew that but it was another bit of stress in the move.
Still, I left and turned up in Mincing Lane to their new offices. My, was it a small organisation. There was HJ and DM as mentioned. The Assistant Manager was a Swiss German from Julius Baer in Zurich – Peter de Muralt. There were two secretaries – Miss Pfaff from Zurich and Gloria (but I can’t remember he surname). At the same time that they took me on, they also employed Peter Hedges to be the banking/back office manager and young girl, Peggy, as assistant to him. It was somewhat of a reality shock to find that I really was the only guy who knew anything about FX and Money Markets – and my Money Market knowledge was pretty thin! One thing I did know was the difference between an Authorised Bank (AB) and a Licensed Deposit Taker (LDT). Every new banking institution, at that time, had to serve time as a LDT before achieving AB status. This normally took about 9 months provided that no rules were broken. The first thing that I found, when I started work, was that the rules, most definitely, had been broken. LDTs were only permitted to carry out money market business – in other words they could borrow and lend money – but only carry out FX transactions within the Exchange Control act which meant that they had to obtain BofE permission, via a green Form E, before any such activity. What I saw immediately on joining was that the bank had outstanding FX forward transactions for which they had no permission. I tackled the management on this and was shocked to find that they thought that it was permissible! This was senior management from established banks proving that they didn’t know the rules! I insisted that they must go to the BofE and regularise the situation, otherwise they were unlikely to pass the BofE’s rules for obtaining full Authorised Banking status as soon as possible.
A meeting took place(without me and without my bosses explaining that they were only there because a 23 year old dealer had told them to be!). It seems that they had fallen into the trap of believing that they were permitted to swap one currency for another provided that it was part of a funding operation. What they were doing, before I joined, was going to Julius Baer in Zurich for all of their funding. This was provided in Swiss Francs. They were then selling the SF spot (two days time) and buying them back at the required maturity date (say, three months time) against US dollars, which is what they needed. Although there was no exchange risk in this, because the exchange rates were fixed at the beginning, they were still carrying out banned transactions. As they had come clean, the Bank of England looked kindly on them and, unusually, gave them permission to carry on doing this provided that they, retrospectively, presented a Form E quoting a specific reference. Well, that was good enough for me so I could carry on doing what was necessary. In fact, it quite shocked me as I hadn’t really considered what working for a bank with such a small capital would entail. It didn’t matter to anyone else as they were involved in all the other activities of international banks but it mattered to me as I was severely constrained in what I could do. I did manage to fill my time but it wasn’t easy.Still more of that later.