Securities & INVESTMENT February 2012 REthe members’ magazine of the VIEW chartered institute for securities & investment cisi.org/s&ir Twenty years of the CISI A look back at two decades in financial services, p12 Christopher Adams Why the Strait of Hormuz is crucial to global oil supplies, p11 Safe as houses How has Denmark’s mortgage market endured for the past 200 years without a single mortgage-bond default? page 16 CISI.indb 1 26/01/2012 17:08 CISI.indb 2 26/01/2012 17:08 Securities & Investment february 2012 RE VIEW Editor Louise Reip Commissioning Editor Hugo Cox 18 16 Senior Designer Pip Atkinson Art Director Steven Gibbon Publisher David Poulton Production Director John Faulkner Managing Director Claire Oldfield Chief Executive Martin MacConnol Advertising Sales Yanina Stachura +44 20 7010 0945 [email protected] 12 Cover illustration George Myers Published on behalf of the Chartered Institute for Securities & Investment by Wardour, 5th Floor, Drury House 34–43 Russell Street London WC2B 5HA Telephone: +44 20 7010 0999 Fax: +44 20 7010 0900 www.wardour.co.uk ISSN: 1357-7069 Communications Editor, Chartered Institute for Securities & Investment Contents Richard Mitchell 8 Eastcheap, London EC3M 1AE Features Members’ features Regulars Telephone: +44 20 7645 0749 12 from back room 22 cpd: history repeating... 5 city view Email: [email protected] to world force Andrew Milligan explains The benefits of providing a Editorial panel In the year of its 20th how the outlook for bond bank account for every child Nick Seaward, Supervision Services anniversary, we trace the and equity yields resembles and introducing financial Chartered FCSI, Chairman Partnership Suren Chellappah FCSI Sanford C Bernstein history of the CISI and hear the pre-war years education at school Moorad Choudhry FCSI Royal Bank of Scotland from the three Chairmen who Simon Culhane, Chartered Institute for Chartered FCSI Securities & Investment secured its global standing 24 hidden agenda? 6 upfront Scott Dobbie FCSI(Hon) Deutsche Bank This month’s Grey Matters News and views from Mike Gould FCSI Russell Investments Victoria Hoskins, Barclays Wealth 16 cover story: dilemma considers the members of the CISI, Chartered FCSI model example gravity of non-disclosure including our regular back Peter Land, Chartered FCSI Brewin Dolphin Gregor Logan MCSI Might Denmark’s securitised story by Clay ‘Mudlark’ Harris Paul Loughlin, Rathbone Investment mortgage system provide a 26 need to read Chartered MCSI Management Robert Merrifield FCSI Legal & General model for other countries? Catch up with this 11 first person Richard Mitchell Chartered Institute for Dan Barnes investigates month’s essential reading Christopher Adams examines Securities & Investment Frank Reardon, JM Finn the possible ramifications for Chartered FCSI 27 diary oil supplies of Iran closing the Patricia Robertson, Westport Global 20 the poor relation Chartered FCSI Dan Barnes looks into CISI events and new Strait of Hormuz Jeremy Robinson, Charles Stanley member admissions Chartered FCSI proposed pensions reform Hamish Rowan-Hamilton TheCityUK and the discrepancies 18 profile: dick saunders Markus Ruetimann FCSI Schroder Investment 30 people: up to speed The Chief Executive of the Management between the public and Nimrod Schwarzmann FCSI RBS Global Markets private sectors John Richardson, Chartered Investment Management Arjuna Sittampalam, Sage & Hermes MCSI, recounts his rise to Association gives Hugo Cox Chartered MCSI Nigel Sydenham, BPP Professional Education the top of the competitive his views on a financial Chartered MCSI world of powerboating transaction tax and Europe Alan Yarrow, Chartered Institute for Chartered FCSI(Hon) Securities & Investment Average audited circulation: 17,886 for period July ‘10 – June ‘11 © The Chartered Institute for Securities & Investment (CISI). All rights reserved. Reproduction in whole or part prohibited without prior permission of the CISI. The CISI and Wardour accept no responsibility for the views expressed by contributors to the Securities & Investment Review; or for unsolicited manuscripts, photographs or illustrations; or for errors in articles or advertisements in the Securities & Investment Review. The views expressed in the Securities & Investment Review are not necessarily those held by the CISI or its members. 3 CISI.indb 3 27/01/2012 10:41 CISI.indb 4 26/01/2012 17:08 city view cisi opinion With many households struggling to make ends meet, and debit cards eclipsing cash, might we benefit from teaching financial literacy from an early age? Banking on education one of the ways to encourage greater pupils and teachers alike. It is seen by many individual receives their National Insurance engagement between voters and the UK as a filler and is not taken seriously by any number. The only form that will need to be Parliament has been the introduction of party – partly because there is no exam. As a completed is one choosing at which bank e-petitions whereby, if an individual can attract teacher giving evidence to the committee noted, the individual wishes to open their basic more than 100,000 electronic supporters, that “nothing concentrates the mind like an exam”, account, and to advise that before their first petition may be discussed in the House of and as a further witness commented, “nothing withdrawal they will need to have visited a Commons. The fourth subject to concentrates a teacher’s mind like an exam”. branch, provided a single piece of identification reach this threshold was a motion calling for Financial education is too important to be and their specimen signature. The financial education to be made a compulsory tagged on as an afterthought; it should be fully bank’s anti-money-laundering requirements part of every school’s curriculum, and was integrated into the maths syllabus and should can be vouched for by central Government, debated with much cross-party support just be tested. Furthermore, given its as it will have completed similar checks when before Christmas. This is an issuing an individual’s National Insurance overdue initiative. As the proposer, Justin number. Therefore, with minimal Tomlinson, noted, debit-card usage now Parliament should insist bureaucratic hassle, each child starts out exceeds that of cash. Within families, about better equipped for their financial journey. 19% of parents have never discussed with that each child is given They can now learn how to pay for goods their teenagers how to spend money and 32% a bank account, at a and services electronically, budget, save have yet to talk about how to budget, or even and participate fully in financial society. No what a budget is, while only 36% of people bank of their choice, longer will financial literacy be an academic understand that the term APR relates to subject; it will be practical, personal and highly payments. It is no wonder, then, without charge relevant. But the MPs should have that we are seeing a proliferation of payday been bolder still. They should have seized loans whose interest rates are close to usurious importance, we should help our children to the opportunity given to them by the EU and make the rate charged by a bank for understand personal finance at a much earlier requirement whereby Lloyds Bank will need unexpected overdrafts look like a bargain. age, especially as electronic money transmission, to transfer one in five of its customers to the Regrettably, at the moment of truth, whether through debit or proximity cards or by Co-operative Bank, without changing either the the politicians shied away from demanding text is, or will be, the norm. individual’s sort code or account number. They real change, preferring a tame motion asking should have mandated the requirement that merely for the Government to consider the Streamlined and straightforward anyone with a bank account is able to keep and provision of financial education as part of the Therefore, Parliament should have insisted port their bank-account number. current curriculum review. However, since that, when a child enters their 12th year of Had they done so, then not only would they the Government had already said that it was formal schooling – in Year 11 and coming up have given every rising 16-year-old a key actively considering introducing financial to age 16 – each child is given a bank account, financial tool, but ensured real competition in literacy as part of the personal social health at a bank of their choice, without charge. the banking sector and allowed the individuals and education (PSHE) curriculum, this was The mechanics are simple. The choice, with the ability to switch accounts as an opportunity lost. The PSHE bank account will arrive automatically, from easily as teenagers today change mobile-phone curriculum is almost universally derided by central Government, at the same time as the providers. There is still time to do both. 5 CISI.indb 5 26/01/2012 17:08 News and views from the CISI Upfront events membership Europe challenges in spotlight Price freeze The London CPD a greater pooling of fiscal resources A freeze on membership fees for the majority of CISI members programme for and obligations as well as enhanced will enter its third year in 2012/13. 2012 got off to a mutual budgetary oversight. Renewals for the year, starting on 1 April, will be billed as follows: flying start when “We have also stated that we 160 members believe that a reform process based Chartered FCSI and FCSI £185 crowded into on a pillar of fiscal austerity alone Chartered MCSI and MCSI £165 the CISI’s first would risk becoming self-defeating, ACSI £120 event in London’s as domestic demand falls in line with Affiliate £110 Frank Gill West End to consumers’ rising concerns about hear three top-notch presentations job security and disposable incomes, Renewing members are reminded that a £10 discount is applied to on ‘Europe 2012 – Challenges and eroding national tax revenues.” payments by direct debit; full details will be included in a renewal Opportunities’.