Take Your Partners: Orion, the Consortium Banks and the Transformation of the Euromarkets

363 Pages·2001·3.59 MB·English

by  Richard Roberts, Christopher Arnander (auth.)

Take Your Partners
Orion, the Consortium Banks and the
Transformation of the Euromarkets
Richard Roberts
with
Christopher Arnander
© The Orion Story Ltd 2001
Softcover reprint of the hardcover 1st edition 2001 978-0-333-94774-6
All rights reserved. No reproduction, copy or transmission of
this publication may be made without written permission.
No paragraph of this publication may be reproduced, copied or
transmitted save with written permission or in accordance with
the provisions of the Copyright, Designs and Patents Act 1988,
or under the terms of any licence permitting limited copying
issued by the Copyright Licensing Agency, 90 Tottenham Court
Road, London W1P 0LP.
Any person who does any unauthorised act in relation to this
publication may be liable to criminal prosecution and civil
claims for damages.
The author has asserted his right to be identified as the author
of this work in accordance with the Copyright, Designs and
Patents Act 1988.
First published 2001 by
PALGRAVE
Houndmills, Basingstoke, Hampshire RG21 6XS and
175 Fifth Avenue, New York, N.Y. 10010
Companies and representatives throughout the world
PALGRAVE is the new global academic imprint of
St. Martin’s Press LLC Scholarly and Reference Division and
Palgrave Publishers Ltd (formerly Macmillan Press Ltd).
ISBN 978-1-349-42667-6 ISBN 978-0-230-59651-1 (eBook)
DOI 10.1057/9780230596511
This book is printed on paper suitable for recycling and
made from fully managed and sustained forest sources.
A catalogue record for this book is available
from the British Library.
Library of Congress Cataloging-in-Publication Data
Roberts, Richard, 1952–
Take your partners : Orion, the consortium banks and the transformation of
the Euromarkets/Richard Roberts with Christopher Arnander.
p. cm.
Includes bibliographical references and index.
ISBN 978-1-349-42667-6
1. Orion Royal Bank. 2. Bank consortia—Europe. 3. Euro-dollar market.
4. Euro-bond market. I. Arnander, Christopher. II. Title.
HG2998.O75 R63 2000
332.4(cid:1)94—dc21 00-049108
10 9 8 7 6 5 4 3 2 1
10 09 08 07 06 05 04 03 02 01
Contents
Foreword by the Rt. Hon. Sir Edward George,
Governor of the Bank of England iv
Preface and Acknowledgements v
List of Tables viii
List of Plates x
Acknowledgements and Notes for End Papers and Plates xii
Prologue: Meeting in Manhattan 1
1 Origins of the Euromarkets 3
2 Rise of consortium banking 17
3 Formation of Orion 41
4 Orion gets going 55
5 Stormy weather: Montagu takes the helm 77
6 Petrodollars 91
7 Competition and innovation 111
8 Shareholders and management 129
9 Swimming against the tide 145
10 Orion Royal Bank 161
11 Decline of consortium banking 177
12 Consortia and strategic alliances in finance 201
Epilogue: The legacy of Orion 211
Appendix I: Chronology 1963–89 213
Appendix II: Euromarket consortium banks 241
Appendix III: European banking clubs 297
Appendix IV: Orion directors and financial statistics 309
Appendix V: The Orion shareholders in 1970 315
Notes and references 323
Index 351
iii
Foreword
by the Rt. Hon. Sir Edward George,
Governor of the Bank of England
The heyday of Orion and its fellow consortium banks in the 1970s now
seems a different era in very many respects. The Euromarkets they were
mostly set up to exploit, which were at that time still relatively new and in a
stage of rapid growth, have now long since become an established and famil-
iar part of the financial scene. And the consortium investment bank itself
looks a strange beast from the perspective of the turn of the millennium,
when international investment banking has become a theatre for fierce com-
petition rather than co-operative endeavour between institutions. But while
the form of financial innovation may have changed, the fact of it is ever-pre-
sent, and as the impact of the Internet begins to be felt it is interesting to see
that some institutions have chosen to combine with others to develop their
on-line business activities when confronted with a new and unfamiliar mar-
ket with high entry costs – much as their predecessors did thirty years ago.
Another theme with contemporary resonance is the impact of tax and reg-
ulation on financial institutions and markets. It is generally accepted that a
large part of the reason why London became the centre of activity for the
Euromarkets was that it was considered, as is mentioned in Chapter 1, ‘a very
warm place for doing business.’ That much, I hope, has not changed over the
subsequent decades, and I like to think that the Bank of England has played
its part in making it so. A successful market-place must have rules of engage-
ment however, and I note that two initiatives of the Bank of England – the
‘Blunden letter’ of 1974 seeking letters of comfort from the major share-
holders of UK-incorporated banks, and the provisioning matrix of 1987 –
are interpreted as having made life more difficult for the consortium banks.
The Bank of England is still very much involved in the striking of this bal-
ance, although nowadays our concern is with the stability of the system as a
whole rather than the regulation of individual institutions.
But, above all, the story of Orion and of consortium banking more broadly
stands as a fascinating account of a period of innovation, growth and, peri-
odically, of crisis in the international financial markets.
iv
Preface and Acknowledgements
Take Your Partners: Orion, the Consortium Banks and the Transformation of the
Euromarkets tells the story of Orion, setting it within the context of the
development of consortium banking and the Euromarkets. Orion was
the most ambitiously conceived and, in its heyday, the most successful of the
consortium banks. Covering Orion, the consortium banks and the European
banking clubs, this volume fills a gap in the literature on late twentieth
century banks and banking.
The project to write the Orion story had its origins at a dinner to cele-
brate the 75th birthday of William de Gelsey, who worked for the bank in a
senior capacity from 1971 to 1989. Together with Lord Swaythling, who as
David Montagu led Orion at its peak and who sadly did not live to see the
completion of this book, a project was launched to write the history of the
bank. A group of ex-Orion executives, Patrick Browning, Rod Chamberlain,
Charles Fisher, Michael Perry, Philip Hubbard and William de Gelsey, came
together to push the project forward. They were joined by Christopher
Arnander, a friend and retired banker, who became the project’s principal
animateur. I became involved when I was approached by him as the poten-
tial author. I welcomed the opportunity to tackle such an interesting subject
and to extend my understanding of the Euromarkets. I have worked closely
with him in the preparation of the text and his advice has been invaluable,
particularly in relation to the appendices and the illustrations. The whole
group has been very supportive and I have benefited greatly from their
comments on earlier drafts. We were all delighted when Sir Edward George
agreed to contribute a Foreword.
I am grateful to National Westminster Bank for allowing me access to the
Orion papers in their archive, accumulated during the years in which the
bank was a shareholder. My thanks, in particular, to archivists Fiona McColl
and Susan Snell for their professional efficiency and cheerful hospitality. I am
also indebted to Alvaro Holguin for the large collection of Orion papers he
produced, many of which were not to be found at NatWest.
v
vi Preface and Acknowledgements
Euromoney, the magazine of the Euromarkets, has been a stalwart sup-
porter of the project throughout. I am most grateful to chairman Padraic
Fallon, who was editor for many of the Orion years, for his insights and for
access to past editions of Euromoney and other assistance. I would also like
to thank Kapila Monet of Euromoneyfor his help with Euromarket statistics
and Howard Picton and his team at the Bank of England Library.
This book was made possible by the financial and other contributions of
many former Orion employees, business partners and advisers, in addition
to those mentioned, namely: John Abell, Ian Armour, Johannes Attems,
Rodney Baker-Bates, David Banks, Carol Barrazone, Norman Bergel,
Christian Brand, Christian Bull, John Bunting, Guy Burgun, David
Burnett, Sir Christopher Chataway, Joseph Cook, Antonino Cravero,
Jefferson Cunningham, Johannes de Gier, John Edwards, Julian Fane, Peter
Fricker, Stewart Gager, John Gent, Sir Samuel Goldman, Sir Ronald
Grierson, William Gurry, Robert Hamburger, Keith Harris, Lord Harrowby,
John Haley, Jan Hasek, John Howell, Nicholas Jordan, Sven Kado, Martin
Klingsick, Richard Knight, Hermann Kunisch, Colin Lambert, John
Langton, Sir Andrew Large, Hans Leukers, Robin McConnachie, Philippe
Manet, Anthony Marshall, Patrick Meier, Fergus Murison, Henry Mutkin,
David Pritchard, Lutz Raettig, David Robertson, David Rockefeller, Joel
Romines, Michael Ross, Alexander Russell, John Sanders, Paul Sauvary, Guy
Scammell, Ana Soares, Peter Sterling, Julian Sturdy-Morton, Colin
Sturgeon, Geoff Styles, Paul Taylor, Bill Tudor John, Jan Willem van der
Velden, Nicholas Villiers, Michael Watson, Michael Webber, Sir Graham
Wilkinson, Sir Philip Wilkinson, Murray Wilson, Paul Wilson, David
Woods and Spike Wright.
A large number of others have provided information and ideas, namely:
Yousef Al-Awadi, Abdulwahab Al-Tamar, Iain Allan, Carlos Alberto
Alvarenga, Nick Anderson, Jan Ankarcrona, David Anthony, Peter Ardron,
Anthony Asseily, John Baden, Brian Balderson, Neil Balfour, Lawrence
Banks, Nicholas Baring, Peter Barton, Robert Bee, Peter Belmont, Simon
Beloe, Sir Norman Biggs, Robert Binyon, Henrik Bjørn, Sir George
Blunden, John Booker, Pascal Boris, Richard Bristow, Vivian Brown, Walter
Brown, Gottfried Bruder, John Butterwick, Alan Cameron, Lord Camoys,
Massimo Carello, Francis Carnwath, Michael Carter, John Champion, Jim
Chesters, Clive Christiansen, Alan Clifton, Lord Cobbold, Paul Coleman,
Peter Cooke, John Dare, Steven Davis, Sir Robin Dent, Marc de Guillebon,
Gonzalo de las Heras, Peter de Roos, Edmund de Rothschild, Leopold de
Rothschild, Richard Elliston, Anthony Enders, Alexander Ercklentz,
Khodadad Farmanfarmaian, Richard Fawcett, Mohammed Fezzani, John
Finch, Robin Fox, Sir Ian Fraser, Staffan Gadd, Thomas Gaffney, Rodney
Galpin, François Garelli, Gavin Geekie, Kenneth Gibbs, Michael Gibbs,
Martin Gordon, Jinx Grafftey-Smith, Lawrence Grand, Sir John Gray,
Preface and Acknowledgements vii
Edwin Green, Brian Grimmond, Henry Grunfeld, George Gunson, Peter
Gwinnett, Maurice Hobson, George Hoffman, Sir John Hogg, David
Hunter, Leonard Ingrams, Alexander Jablonowski, Sir Martin Jacomb, Clive
Jenkins, Peter Johnson, Christopher Keen, Michael Kenyon-Slaney, David
King, Lord Kingsdown, Leslie Knox, Rodney Leach, Gérard Legrain,
Gunnar Ljungdahl, Ian Logie, Marcel Luckman, Euan Macdonald, Michiel
Matthes, James McNeill, Kenneth Mendenhall, Maximilian Meran, Robin
Monro-Davies, Alan Moore, Sir Jeremy Morse, Sean Murphy, John Nash,
Junichi Nishiwaki, Bertil Norinder, John Orbell, Darius Oskoui, Sir
Geoffrey Owen, John Padovan, Alan Peachey, Nigel Pearson, Uli Pendl,
Dennis Phillips, Thomas Pomeroy, Brian Quinn, John Ratner, Hisham
Razzuqi, Helen Redmond Cooper, Jürgen Reimnitz, Lord Richardson,
Michael Robarts, Dr Duncan Ross, Stanley Ross, Kevin Ruxton, Lord
Sandberg, Peter Sandringham, Rainer Schlitt, Sir David Scholey, John
Sclater, Professor Brian Scott-Quinn, William Slee, Terry Smeaton, Peter
Stormonth Darling, Ian Stoutzker, Graham Sunderland, David Sunray,
Russell Taylor, Stephen Timewell, James Tree, Sir Anthony Tuke, Simon
Udale, Simon Wathen, Martin Vander Weyer, Alberto Weissmüller, Michael
Wells, David West, Richard Wheeler Bennett, Giorgio Winteler, Alan
Wiseman, Michael Wood, John Woodhead, Stanislas Yassukovich, James
Young, Graham Ziegler and Minos Zombanakis.
Among the organizations that have supported the book in significant
ways are Allen & Overy, Bremer Landesbank, International Securities Market
Association, National Westminster Bank, Österreichische Kontrollbank,
Royal Bank of Canada, The Mitsubishi Centre, Westdeutsche Landesbank
Girozentrale and UniCredito Italiano.
After an era of considerable success in the 1970s, the European consor-
tium banks and banking clubs fell into abeyance by the end of the 1980s;
shareholder competition, deregulation, globalization and the Third World
Debt crisis changed their world. It looked as though cross-border joint ven-
tures in banking were a passing phase. But by the beginning of the twenty-
first century, a new type of association had emerged among international
banks – specialized joint ventures with specific aims. So consortium banks
were reappearing, in a new form appropriate to the new age.
Richard Roberts
List of Tables
1.1 Eurobond new issues volume, 1963–72 10
1.2 Dollar-denominated external liabilities of
1.2 UK banks, 1957–72 14
1.3 Foreign banks in London, 1967–72 14
2.1 Formation of London-based consortium
1.2 banks, 1964–84 30
2.2 Top-10 London consortium banks, 1976 38
4.1 Orion, syndicated loans lead and
1.2 co-managed, 1971–73 58
4.2 Orion Termbank, loans and staff
1.2 numbers, 1971–73 59
4.3 Orion Termbank, sources of revenue, 1972 60
4.4 Orion Termbank, performance, 1971–73 61
4.5 Orion Bank, Eurobonds lead and
1.2 co-managed, 1971–73 66
4.6 Orion Bank, loans and capital, 1971–73 71
4.7 Orion Bank, performance, 1971–73 74
6.1 Oil exporters’ income, 1970–80 92
6.2 Oil exporters: disposition of surpluses, 1974–80 94
6.3 KD Eurobond issues, 1974–80 100
7.1 Foreign banks in London, 1973–80 112
7.2 Mean spreads over LIBOR, 1975–80 113
7.3 Chicago financial futures, annual volume, 1972–80 115
7.4 Orion Bank, lead and co-managed syndicated
1.2 loans, 1974–79 116
7.5 Orion Bank, syndicated loan arrangement
1.2 fees, 1976–79 116
7.6 Orion Bank, geographical distribution of the
1.2 loan portfolio, June 1978 118
7.7 Orion Bank, Eurobonds lead and co-managed, 1974–79 119
viii
List of Tables ix
07.8 Lead managers, Eurobonds, 1976–78 119
07.9 Orion Bank, performance, 1974–79 125
08.1 Position of consortium banks in the syndicated
Euroloan market, 1973–76 131
08.2 Participations in sample of syndicated
loans managed by Orion 133
09.1 Orion Bank, analysis of income for 1979 152
09.2 Orion Bank, syndicated loans lead and
co-managed, 1979–81 153
09.3 Orion Bank, Eurobonds lead and
co-managed, 1979–81 154
09.4 Orion Bank, performance, 1979–81 155
10.1 Orion Royal Bank, Eurobonds lead
and co-managed, 1981–88 163
10.2 Royal Bank of Canada, syndicated loans lead
and co-managed, 1981–88 166
10.3 Mean spreads over LIBOR, 1981–88 167
10.4 Orion Royal Bank, performance, 1981–85 169
10.5 Number of lead managing investment banks,
1980–87 172
10.6 Indicative commissions on floating rate
note issues, 1980–86 172
10.7 Orion Royal Bank, performance, 1986–89 174
11.1 Consortium banks’ foreign currency loans as a
proportion of total UK banks’ foreign
currency loans, 1975–87 177
11.2 ‘Disappearances’ of consortium banks, 1975–92 178
11.3 ‘Disappearances’ of consortium banks, 1975–82 178
11.4 Use of inter-bank market for foreign
currency funding 183
11.5 Maturity transformation in foreign currency,
1975–83 183
11.6 ‘Disappearances’ of consortium banks, 1983–86 187
11.7 ‘Disappearances’ of consortium banks, 1988–92 190
11.8 Performance of UK consortium banks, 1966–90 193