Academic journal article ABA Banking Journal

Banking in the 3rd Millennium; Universal Banking American Style, Is the Grand Vision of New York's Bankers Trust Company

Academic journal article ABA Banking Journal

Banking in the 3rd Millennium; Universal Banking American Style, Is the Grand Vision of New York's Bankers Trust Company

Article excerpt

How the beleaguered Bankers Trust Co. of New York shook off its negative image and became, seemingly overnight, a favorite of the financial press is one of the most remarkable stories of the decade. And yet, behind the headlines, another story is unfolding, not of damage control, but of banking's future; a story of strategies based on a vision of market structures and systems; a story that may influence how others shape their own plans for the kind of financial services industry that will evolve in the third millennium. For that story, we spoke with Bankers Trust Vice-Chairman George J. Vojta, a senior strategist who was also Citibank's top global banker in the 1970s, as well as its chief strategist for the 1980s.

A changed profit mix, new top managers, and a pair of high-profile mergers transformed the bank's image, in the view of most of the business-media coverage. No longer a firm of sharp traders, Bankers Trust was now an investment bank. Of course, long-time observers knew that Bankers Trust was more than a trading firm and had long been an active investment bank, albeit mainly for bond issuers. But, starting in 1993, the bank's traders got a lashing from reporters as Bankers Trust became the whipping-boy for the huge losses of Procter & Gamble, Hallmark Cards, and other self-proclaimed innocents in the derivatives markets. A Federal Reserve sanction tripped up the bank s energetic defense, and then, in late 1995, a scathing BusinessWeek cover story all but accused the bank's bond salesmen of tacking bullseyes on their most naive customers to mark them for the trickiest derivative deals. That was the bottom.

Last year, immediately after taking over, new Bankers Trust CEO Frank Newman settled the P&G suit. A few months later, retired Federal Reserve Board Chairman Paul Volcker joined the Bankers Trust board. This year, Bankers Trust became the first to take advantage of recent Fed decisions to let banks greatly increase their securities activities, first by boosting revenues in their so-called Section 20 securities subsidiaries and, second, by using internal models to calculate their capital requirements based on trading risks.

Things really got moving in April of this year when the bank announced, at the tempo of a drum roll, a series of positive developments. Among them: its 1996 revenues were up 29% from 1995; it planned to acquired Baltimore-based investment bank Alex. Brown & Co., and the company's global division would help Nippon Credit Bank securitize its bad loans (see "Key Strategies" p.36).

All of these were first-order events in their respective markets. Taken together, the impression was one of a coordinated push into new territory. Less apparent was the unifying vision that wove these moves into what B.H Liddell Hart, the great British military historian, called Grand Strategy. "The object of war," wrote Hart, "is to attain a better peace."

If generals must focus on the ensuing peace, then bankers must focus on the financial markets after global integration. At Bankers Trust, that means actively shaping the new gobal infrastructure, as well as taking a dominant position in it.

George Vojta is one of Bankers Trust's key strategists. During a career at Citibank that spanned 20 years, Vojta (pronounced VOY-ta) ran the giant bank's 1,000 international branches and was also its strategic planning director. After a two-year stint at Salomon Brothers, Vojta joined Bankers Trust in 1984 where he has had responsibility for information management and transaction processing service groups, as well as client, credit, and risk activities. Today, he runs Bankers Trust's private bank, secured lending, new venture businesses, and the global networks. In an interview, he shared the bank's vision of the coming financial market structure, using as a prism his 35 years in banking, which spans the development of the modern financial markets.

Recapturing the franchise

In the best tradition of grand strategy, Bankers Trust is trying to shape the "peace" while it wins the competitive wars. …

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