Investment chiefs deny credit crunch recklessness

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The Independent Online

Top executives from four of the world's biggest banks insisted yesterday they had not been reckless during the boom that led to the credit crunch, even as two of them admitted their entire profits from debt investments had been wiped out by recent losses.

Under questioning from the House of Commons Treasury Select Committee, bankers from UBS, Goldman Sachs and Citigroup conceded that their reputations had been damaged by the fallout from the credit crunch. Deutsche Bank denied its reputation had been damaged.

William Mills, Citigroup's chief executive of markets and banking for Europe, Middle East and Africa, said: "In distributing products, I don't think we were reckless. We gave full disclosures. We were dealing with what we thought were sophisticated financial institutions."

Gerald Corrigan, managing director and co-chair of risk at Goldman Sachs, said: "Mistakes were made, there's no question about that." He denied that banks had been reckless in structuring and selling complex investment products to investors. But he said banks needed to work harder to explain the products to investors.

Mr Mills said Citi's profits from the explosion in credit over recent years had been wiped out by up to $11bn of writedowns it expects to make. Jeremy Palmer, chief executive of Europe, Middle East and Africa for UBS, the Swiss bank, said the same was probably true of his company.

Both Citi and UBS have fired their chief executives in recent months as losses from exposures to sub-prime debts and other credit have rocketed. Asked by the Labour MP George Mudie why UBS had not made enough money in the good years to cover losses, Mr Palmer said: "Different decisions were made at different firms at different times [which led] to different outcomes."

Lord Aldington, chairman of Deutsche Bank London, said he did not think anyone at Germany's biggest bank had anal-ysed whether it made more money than it lost but he said it was "an interesting question".

Mr Mudie was incredulous and asked: "Why wouldn't you do it?"

Mr Corrigan said: "On balance, we probably made money. We have had a measure of success in hedging some of our exposure." Goldman has been the best performing US investment bank during the credit crunch after placing big bets against the sub-prime market in April.

Mr Mills said Citi had no obligation to take structured investment vehicles (SIVs) on to its balance sheet but said the bank's reputation was at risk if it did not try to support SIVs it sponsored. Asked if people needed to take a hard look at off-balance sheet vehicles, he said: "I think the answer clearly is yes."

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