A banker from Africa has a revolutionary idea about how to reform high finance – ask him a question in the thread below, or tell us your views on how to reconnect the City with realityThe gap between high finance and the rest of society is one of the main themes of this blog. How to close it? Today's interviewee has a truly different perspective and hence a rather revolutionary proposal: why not go back to real banking?He was born and bred in Africa, where he started his career in finance. Later he moved to London and worked on a trading floor – though not as a trader. As he put it: "I am good at maths and had the intellectual capacity to trade collateralised debt oligations and other complex financial instruments. But it's just not real banking."The full interview is here, containing some deeply counterintuitive statements about how complex financial products might help development in Africa. The interviewee is coming into the threads to discuss these ideas, as well as his rather revolutionary suggestion to go back to real banking. What does he mean by that?Basically, he says, you should not be allowed into investment banking (the bonus-heavy areas of financial markets and deal-making) before working for a number of years in traditional banking. How would that work?"I went to work for one of the British banks [in Africa] and it was great. I would work in all of the areas of proper commercial banking, each time in a different country. So I'd spend three months in Ghana, in Kenya, Ivory Coast, Zimbabwe. And learn about asset finance (helping companies buy equipment), trade finance (helping companies trade), balance-sheet advisory, structural financing ..."Later he sat on a trading floor in London and that was a big shock. "In London the actual economy was so far removed from your work it might as well not exist. Traders would come in, turn on the computer and on their screen they find money, right there. That creates such a different mentality from what I had been doing in Africa. That was very surprising for me to see, that you could be a trader without ever having seen what banking actually is. To this day I can go to Lagos and say: I built that shopping mall. And that bridge."He added: "These days bankers are recruited straight out of elite universities, they've never seen how you actually run a business. All the way to the top it's an insulated community."The interviewee believes that if young bankers were forced to work in the real economy during their formative 20s, we'd have a very different sector. Right now, he says, the outside world is trying to bring finance to heel with new regulation. That won't work:"All that happens with new, ever more complex rules is that people get very good at getting round them. More and more, success in investment banking amounts to being able to game the rules and get capital. Trading floor politicians, I call them."So here's his idea: "Change the hiring and recruiting. Send everyone into real banking first, before they can go into investment banking. So everyone starts in retail, where you actually see that old lady stumble in with her savings to make a deposit, see that local businessman struggling to run his company and pay wages. You make a number of real loans to businesses, proper commercial lending. Next you spend two years in restructuring, cleaning up after a bad loan – and you learn what happens when your bank lends money to the wrong party."And who knows, he continues, when the big players return to actual banking, they might see the massive opportunities in places such as Africa:"Africa desperately needs so-called 'deeper capital markets'. If more local people make local deposits, and they invest those in their own country, there are none of the currency or inflation risks you have with foreign investors. But since there are so few solid local places for the African middle class to invest in, most of it goes into real estate which then becomes massively overheated.Securitisation, currency and interest swaps … these instruments, if applied correctly, could do a massive good in Africa. Africa desperately needs 10, 20, 30 years' money – ie long-term investments – to build roads, railroads, bridges, airports, irrigation projects ...The City could do this. Go back to real banking."Read the full interview here, especially if you intend to leave a comment or ask the interviewee a question.• This banking blog features interviews with insiders across the industry. Here is a guide to help you find your way.This professor at an elite university trains the next generation of investment bankers: "They aren't here to learn, they're here to pass."This young mergers and acquisitions (deal-making) investment banker decided to quit the industry for some of the reasons discussed by today's interviewee: "When we'd discuss a pitch or potential project with the team, nine out of 10 times the first question would be, 'Where's the fee event?'"BankingBanking reformFinancial sectorEconomicsWork & careersJoris Luyendijkguardian.co.uk © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds
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