Magazine article American Banker

Morgan Walled off Banesto Link from Bank Activities, CEO Says

Magazine article American Banker

Morgan Walled off Banesto Link from Bank Activities, CEO Says

Article excerpt

NEW YORK -- J.P. Morgan & Co.'s "Chinese wall" separating investment banking from its other activities was in full force in its recent dealings with Spain's troubled Banco Espanol de Credito, Morgan chief executive officer Denis Weatherstone said.

Mr. Weatherstone made his first public comments about Banesto in a letter answering a Jan. 27 request by U.S. Rep. Henry Gonzalez, D-tex., to describe Morgan's role in Banesto.

Spain's central bank replaced Banesto's board in December, including Morgan vice chairman Roberto Mendoza. Mr. Weatherstone said Mr. Mendoza was not involved in managing Banesto and kept Morgan "fully informed of developments . . . .c

Morgan Unit Is Primary Link

Morgan had been adviser to Banesto on capital-raising efforts, but Mr. Weatherstone said the primary link between Banesto and Morgan was the investment made in Banesto by Corsair Partnership L.P., a private investment partnership run by Corsair Inc., a wholly owned nonbank subsidiary of Morgan.

Mr. Mendoza sat on the board of Banesto as a representative of Corsair.

The Banesto affair has been viewed as an embarrassment for Morgan in its effort to expand its role as an investment bank. It is also seen as a stain on the reputation of the bank, whose name is synonymous with high quality, safety, and good judgment.

Morgan's problems with Banesto revived concerns about the wisdom of further easing the Glass-Steagall Act, which separates commercial and investment banking in the United States. …

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