The French Connection: Is our banking crisis a Parisian problem?

Nicolas Sarkozy blamed London for the financial crisis. But Paris has played its part too, says Rosamund Urwin
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20 July 2012

Perhaps it’s all part of a socialist plot to bring down the Anglo-Saxon banking system.” So one Square Mile joker quipped yesterday after it emerged that the former Barclays euro-swaps trader who has been dragged into the interest rates fixing scandal had spent a chunk of his career in Paris.

Philippe Moryoussef, a 44-year-old Moroccan who worked for Société Générale in the Nineties before joining Barclays, isn’t accused of any wrong-doing but is being investigated as part of US regulators’ probe into the alleged manipulation of Euribor, the European inter-bank lending rate.

He is the anonymous “Trader E” in the FSA’s account of suspected interest-rates rigging. Moryoussef joins a set of financiers with a French connection who have found themselves at the centre of a banking scandal. His stablemates include Jérôme Kerviel, the Soc-Gen trader who almost brought the bank to its knees in 2008, Fabrice Tourre, who was named when US financial watchdogs investigated Goldman Sachs for fraud in 2010, and Bruno Michel Iksil, the “low-profile” French trader working at JP Morgan when the investment bank suffered $5.8 billion in losses.

After former French President Nicolas Sarkozy blamed the financial crisis on Anglo-Saxon banking culture and as a growing number of foreign executives talk about “a London problem”, a few men in pinstripes are using this quartet to argue that it is just as much a Paris problem.

So what explains the French connection between these four? It is partly a numbers issue — there are legions of French or France-trained financiers in the City, attracted by the Anglo-Saxon approach to business, as well as the chance of swifter promotions and the ability to make more money than they can in their homeland. But it is also because many specialise in derivatives, the complex financial instruments at the heart of the financial crisis. That is often attributed to the superior teaching of mathematics in French schools as well as the fact that French titans Soc Gen and BNP Paribas have vast derivatives desks in London, and that their rival investment banks head-hunt from this pair.

Online, a couple of conspiracy theorists reckon banking bosses are playing “find the French fall-guy” whenever something goes wrong. But another native was happy to play up to the anti-capitalist stereotype yesterday afternoon. “Have you appreciated Kerviel?” he tweeted in French. “Are you passionate for Tourre? Did you dig Iksil? You will adore Philippe Moryoussef!” Somehow, I don’t suppose many in the City will find that funny.

Philippe Moryoussef

Secret identity: Trader E

Who? A euro-swaps trader at Barclays between 2005 and 2007. An acquaintance described him as “cool and understated, not flash or arrogant at all”. He apparently has interests far beyond the City: “He reads, he dives, he doesn’t talk about the City. His wife, Karime, is also pretty successful. They strike you as a cool, quite private couple who are very international.” While in London, he lived in Primose Hill with Karime and their two children in a three-bedroom flat that looks unshowy on the outside but is plush inside. Neighbours say they didn’t see Moryoussef much.

CV: He could be considered a harbinger of financial calamity — having had spells at disaster-hit Royal Bank of Scotland, Barclays and Soc Gen. Employees at Morgan Stanley and Nomura — where he later worked — may feel nervous.

The French connection: He was educated at the French school Lycée Descartes in Rabat, the Moroccan capital, and was employed by Societe Generale in the Nineties.

Now: He moved to Singapore last summer to work for Nomura, but left the Japanese bank last month as investigators probe his involvement in the suspected manipulation of interest rates.

Gallic flair factor: 2 out of 5

Bruno Michel Iksil

Secret identities: The London whale, the White Whale, Voldemort.

Who? A French trader who commutes from Paris to London, where he worked for JP Morgan’s Chief Investment Office. Iksil is said to dress in black jeans and go without a tie. On his Bloomberg profile, he said he can “walk over water” but is “humble”.

CV: Started at JP Morgan in 2005 and used to have a reputation for being bearish. Turned rather more bullish, making big bets which saw him dragged from the shadows into the spotlight amid a $5.8 billion trading loss at the investment bank.

Now: Halted trading in April and is reportedly leaving JP Morgan.

Gallic flair factor: 3 out of 5

Fabrice Pierre Tourre

Secret identity: Fabulous Fab (he claims someone else gave him the nickname).

Who? The Goldman Sachs mortgage trader who was the only person named when financial watchdogs charged the investment bank with fraud. Tourre is alleged to have sold toxic mortgage investments which were designed to fail. He moved from New York to London in 2008 and earned £1.5 million a year. Likes to party, apparently.

CV: France-born “Fab” is a graduate of the prestigious École Centrale Paris and joined Goldman 11 years ago.

Now: Has done voluntary work in Kigali, Rwanda this year and is studying for a PhD in economics in Chicago as he awaits trial on a civil fraud charge brought by the SEC.

Gallic flair factor: 5 out of 5

Jérôme Kerviel

Secret identities: Either a French Robin Hood or an “evil genius” and a “terrorist”, depending on whom you ask.

Who? The suave rogue trader who almost brought down Soc Gen. Some view him as a hero: there was a Facebook campaign to award him the Nobel Prize for economics, and a line of T-shirts carry the slogans “Jérôme Kerviel’s girlfriend” and “When I grow up I want to be like Jérôme Kerviel”.

CV: Joined Soc Gen in 2000 to work — amusingly, with hindsight — in its compliance department. Soc Gen claims he took “massive fraudulent positions” in 2007 which were discovered in January 2008.

Now: Was ordered to repay the €4.9 billion he lost. Currently works for Lemaire Consultants & Associates, a computer consultancy firm, and is awaiting the outcome of an appeal against his conviction

Gallic flair factor: 4 out of 5

Additional reporting by Oscar Williams-Grut

Tales from the city

Simon English

From embattled City trading desks and the offices of beleaguered bankers across town comes this huzzah: thank God for the French.

That’s not admiration for their fine wines and superior weather, just appreciation that for the moment that nation’s financiers are distracting attention from the crimes of the Brits and the Yanks. “They” are making us look good. Or at least less bad.

Asked why so many controversial traders seem to be from France, one stockbroker waved an imaginary Gauloises and replied: “Tis zee Gallic flair, non?”

More seriously, there seems general agreement that the French approach to finance, perhaps to life itself, while admirable in so many ways, does seem to encourage miscreants to think they can scheme and get away with it.

Says one banker: “I’ve been to the Paris financial district and it’s permanently at lunch. We used to deal with some right dodgy characters over there when I was in the money markets and what surprises me is that there aren’t more insider trading scams at some of the French banks — they are just such insular institutions that think they’re above the law.”

One bank analyst said: “My old boss had a theory that in every single bank there is a bunch of people who sit in the corner. No one quite knows what they do, they talk among themselves in hushed tones. But whenever someone asks what they do, the answer comes back that they make a lot of money for the bank in derivatives. And in every single case they are French.”

Another analyst who worked at Soc Gen as Jérôme Kerviel was concocting his catastrophic trades says the bank paid close attention to detail and none to the bigger picture.

“They were so strict signing off on our expenses and over editing my research reports. They must have been concentrating on that, rather than the odd €50 billion he was punting about.”

It may be a pay issue, too. Since French banks reward less, a trader notes, this fuels resentment: “The French are very envious of their peers in other international banks, doing the same job. Société Générale, Credit Agricole and BNP pay relative beans [compared with] Goldman Sachs, Morgan Stanley, Citi, JP Morgan, Deutsche and Bar Cap.”

One tale doing the rounds in the City is this: when the 2008 crash happened many French bankers were making deals with their bosses to be fired from their bank in the UK because they knew if they returned to France after being made redundant, they could claim two-thirds of their salary from the government for up to three years. They were getting bonuses lumped into basic salaries so they could get even greater compensation from the government while they sat out the financial crisis. This might not have been widespread or even true, but plenty of people think it is.

The latest financial scandal has a strongly Gallic air. Says our French-critical broker: “You wait till the Euribor scandal breaks properly. Then the merde will really hit the fan…”

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