FT SPECIAL REPORT The FT’s Year in Finance Tuesday December 11 2012 www.ft.com/reports | twitter.com/ftreports Survivors in the post-crisis world Inside » Law of the jungle Lex in Depth looked at the A turbulent year led to heated debates about the future of the eurozone and of capitalism itself, writes Sarah Gordon valuation of online retailer Amazon n the world of finance, the great though, was not the word to describe Page 2 survivor of 2012 is undoubtedly some of the losses caused by financial the euro, some would say against misbehaviour. UK banks racked up the odds. Last January, the Finan- huge provisions – £10bn and counting Fighting back cial Times asked 83 leading econ- – for their misselling of personal pro- Iomists whether they thought the cur- tection insurance. JP Morgan was hit from obscurity rency would survive 2012 “broadly by a $6bn loss due to unauthorised Richard Waters on intact”. Only 43 answered “yes”. Yet, trading by the so-called “London as the end of the year approaches, and whale”. Kweku Adoboli, who lost his tech giants’ fight even if the present calm proves tem- employer UBS $2.3bn, was sentenced for survival porary, the worst of the eurozone to seven years. storm appears to have passed. In the US, the probe into insider Page 2 If the eurozone had broken up, it trading claimed more scalps. Rajat would not have been for want of Gupta, once head of McKinsey, was champions trying to hold it together. sentenced to two years and a $5m fine US cliff­dancing The year has been marked by support- for passing confidential information ive policies – ranging from €1tn in to Galleon Group’s Raj Rajaratnam, Gillian Tett loans to the region’s financial system although Mr Gupta remains free pend- assesses the fiscal from the European Central Bank to ing appeal. HSBC, meanwhile, was bailouts of Spain’s wobbling banks, fined $700m for money laundering in challenges facing not to mention repeated last-minute Mexico. But the most far-reaching Barack Obama agreements on Greece’s austerity pro- financial scandal of 2012 was the reve- gramme and the establishment (in lation that Barclays, and other banks, Page 3 principle but not, so far, in practice) had rigged market interest rates, of a Europe-wide banking union. including Libor, the London interbank A turning point was reached in July offered rate, for financial gain. Bar- In defence of when Mario Draghi, ECB president, clays’ involvement led not only to a pledged to do “whatever it takes” to large fine but to the departure of its the banks save the euro. The frequent all-night- chief executive, Bob Diamond, and its Regulation can halt ers in Brussels, as well as develop- chairman, Marcus Agius. ments around the region, were cov- This special report gives a flavour progress, says ered by our correspondents and ana- of the FT’s coverage of the continuing Patrick Jenkins lysed by influential commentators upheavals in global financial markets, from inside and outside the FT. of the attempts by politicians and Page 3 Beyond the eurozone, the wider regulators to address it, and of those discussion over the shape and nature David Bromley contributing to it. There is much of the post-crisis financial world more we could have included – the Libor: aiming remained heated. Martin Wolf fol- slowdown in China’s economy; lowed the FT’s series on Capitalism in voted down the remuneration package of Xstrata. The deal had a difficult factor in the failure of another of the Apple’s rise to become the world’s for a fix Crisis with his suggestions for seven of Sir Martin Sorrell, and Aviva’s gestation; Glencore’s final offer was a year’s proposed deals – the £36bn most valuable company; and commen- Doubts at the ways to fix capitalism, kicking off a Andrew Moss and David Brennan of result of talks brokered by Tony Blair, tie-up of EADS and BAE Systems. tary from the world of academia as fierce debate on the letters pages. AstraZeneca both stepped down, the former UK prime minister, and Bogged down in wrangling between well as business. For those who want heart of the Fierce debate also characterised partly in response to investors’ ire almost came unstuck over Xstrata’s its shareholders, the deal finally fell more than we can fit on the printed lending indutsry many annual meetings, as sharehold- over their pay. Executive pay was also proposal to pay £170m in retention apart because the German govern- page both now and in 2013, it can be ers across the globe flexed their mus- a big factor in the year’s most news- payments to key staff. Pay was per- ment wanted the merged company to found at www.ft.com. Page 4 cles. In the UK, WPP shareholders worthy deal, the takeover by Glencore haps the only issue that was not a be headquartered in Munich. Petty, Sarah Gordon is Companies Editor. Bitter fallout looms as Merkel seeks a change in relations public anger. Spain is views of the dominant the European level might hoping for a €100bn bailout partner: Germany. Germany accept any of its banks but, alas, one According to a translation further losses of national that benefits the creditors I have received from the sovereignty. of banks at the expense of German embassy, Angela These positions raise big the creditworthiness of the Merkel, Germany’s questions. Is there time government. cautious chancellor, told available to impose these Martin Wolf At current rates of the Bundestag last week new rules and procedures, interest, it is only a matter that she wishes to say to given the huge internal of time before Spain “all those who . are imbalances, wide “Marry in haste; repent at requires a fiscal rescue. intent on persuading divergences in leisure.” Full of impetuous That would exhaust the Germany that we need competitiveness and severe ardour, Germany’s partners available resources of the eurobonds, stability funds, fiscal pressures? Moreover, seduced – some might say eurozone. It also risks a European deposit does Germany have any blackmailed – the turning a proud country guarantee scheme, many flexibility over positions continent’s most powerful into a dependency, with more billions and much that are partly prudential, economy into sacrificing frightening results for more: yes, Germany is partly constitutional and monetary independence stability. strong”. partly moral? My guess is two decades ago. But, as Italy’s fiscal deficits are Moreover: “We’re the answer to these the prince in Giuseppe di far smaller than Spain’s, convinced that Europe is questions is: No. Lampedusa’s Leopard but its rollover problem is our destiny and our future Yet whatever the remarked of his own bigger. According to the . But we’re also aware answers might be, it is indissoluble union: “Fire International Monetary that Germany’s strength evident that Germany’s and flames for a year; Fund’s Fiscal Monitor, isn’t infinite.” approach guarantees ashes for thirty.” Now is Italy needs new financing Furthermore: “Quite continued strong austerity the eurozone’s time of equal to 28.7 per cent of apart from the fact that in the vulnerable countries ashes. gross domestic product these seemingly simple and, in all probability, Heads of government of this year, far above proposals . are unfeasible mediocre growth in the the group of 20 leading Spain’s 20.9 per cent. in constitutional terms, eurozone. That, in turn, countries who do not come Moreover, what follows the ensures the recurrence of from the eurozone must government of Mario political and economic feel like marriage Monti, due to leave office crises, even if the eurozone counsellors trying to next year, is an ‘They would make survives. If the marriage reconcile partners far too enigma. mediocrity the counsellors wonder why different in character and To this, one must add they must endure all this, values to live happily the divergence of views on yardstick for the answer is clear: this together. The careless economic policy between time, Germany intends to lending before 2007 France and Germany. Europe’ secure the behaviour it aggravated the danger. François Hollande’s Angela Merkel, wants from its That carelessness, parliamentary victory will Germany’s chancellor partners. exacerbated by the notion add to the stress. The I can envisage five that the marriage made coming debate over what outcomes: first, a happy all equal, has made the a growth strategy means, they are completely marriage, on Germany’s crisis far worse. while necessary, risks counterproductive. They terms, albeit after a painful Those whom borrowing becoming quite heated. would make mediocrity the period of adjustment; afforded a standard of Why, then, does anybody yardstick for Europe. We second, a miserable living above what they imagine that this difficult would thus be forced to marriage, which endures could afford are being marriage can endure? One abandon our goal of because a break-up is too forced to accept a plunge answer is that most maintaining prosperity in costly; third, a degree of into poverty. citizens of the eurozone the face of international mutual accommodation, in Not surprisingly, they wish it to do so. The most competition.” which the north becomes resent the change. powerful, however, is that To all this she added: more southern and the The Greeks, unhappiest people are (rightly) “The fiscal compact is a south more northern; of all, have apparently terrified of the first step towards fourth, a partial break-up, chosen a government of consequences of a combining greater unity with the remaining parties slightly less break-up.