Profile: Jacques de Larosiere - A moderate success

Richard Halstead meets the president who stripped the EBRD of its reputation for excess
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The Independent Online
Jacques de Larosiere has a dilemma. The immaculately attired French president of the European Bank for Reconstruction and Development (EBRD), who will be 68 later this year, has been asked - urged - to stay on for another term by his shareholders, the governments of the United States and the European Union.

The bank is performing as well as it ever has done, taking its loan book up by a third to ecu7.7bn (pounds 5.3bn), and recording an operating profit of ecu97.3m before provisions. It has finally become a respectable institution, and those with even short memories will know what a turn-up for the books that is.

Indeed, renewing the contract should be one of his easiest decisions, particularly compared to a lending decision that would put a large chunk of the bank's ecu20bn capital (recently raised from its original ecu10bn) at risk.

But it is not. In the next few weeks de Larosiere will have to decide between staying at his job in London, which would inconvenience both him and his wife (who last year was hit by a lorry and has been getting treatment for a badly damaged leg in Paris), or returning home - perhaps to another job, perhaps into full retirement. "I am not playing for some better offer. I genuinely do not know what to do," he says.

His impending decision may be weighing on him, but de Larosiere appears relaxed - his meetings schedule is even running on time today, says his press secretary with some surprise.

All in all, it is a good day to be president of the EBRD. He has just finished what, in terms of this bank at least, was a rewarding week. Despite revelations last weekend that a former senior bank executive had been forced to repay pounds 6,000 worth of unauthorised expenditure last year, the annual meeting of the bank, which this year took place in London, has gone well. The shareholders were pleased with its performance; for de Larosiere's part, he outlined the new strategy for the bank, which will take it further into the exciting, if uncertain, territory of business in the Russian republics.

"Our mandate means we have to move towards difficult countries, do deals that commercial banks will not do, and try with each deal to improve the environment for doing business in that country," he says. The alternative, he adds, would be to look elegant and do nothing. "I would much rather be doing deals than doing speeches."

The problems with such an approach loom large, particularly when one leaves the relatively secure lending environment of a Czech Republic or a Hungary, and moves east. For example, the rather fast and loose method of dealing with western shareholders favoured by some Russian businesses was emphasised this week in the attempts by Mosenergo, the Moscow electricity utility, to limit the rights of foreign shareholders. "To do good business one has to be transparent, and have rules that are followed. The Russian government is aware of the dangers here, and I believe they will take the appropriate action."

As well as moving the bank's mandate further east, de Larosiere's four years at the EBRD have been marked by his parsimonious behaviour towards the bank's operating budget, something that never afflicted his predecessor, Jacques Attali. The story is an old one and one that the EBRD would prefer to forget. To summarise: Attali took private jets where trains would do; he ordered Italian marble for the London headquarters; the 12th floor was turned into a fantasyland of luxury offices for the president and his acolytes.

The Attali era, which only lasted from the bank's founding in 1991 to his abrupt departure in 1993, nearly cost the EBRD its existence. The American government, the largest single shareholder and a reluctant initial partner, came close to cashing in its chips. The era spawned epithets that even today haunt the institution: the European Bank for Refurbishment and Decoration; the Glistening Bank.

Even de Larosiere, who has studiously avoided criticising his flamboyant predecessor, admits there was a sense of crisis: "We had to have a complete redress. Our priorities had to change immediately, or else we may not have survived as an institution."

It would be unfair to apply the "glistening" label today. The marble may still grace the lobby and lift areas, but much has changed. The 12th floor is now let to another bank, and the executive dining room has been closed; all staff, president included, eat in the canteen. The bottom- line result is that the operating budget has been static in real terms since Attali's day, but the loan book - and to an extent the amount of work - has quadrupled. The frugality of de Larosiere has become well known: he famously flies economy class, when company policy allows the boss to go business. But he now admits to business class over the Atlantic, particularly when his wife is with him.

"I cannot understand excess," he says later in the interview. "When I was growing up in Paris, my family never took a taxi; that was frowned upon. It was the Metro for us always." The same attitude at the bank has warmed the hearts of the shareholders, but some of the austerity measures have led to accusations of "penny wise, pound foolish", the subtext being that obsession with costs is getting in the way of good business. His response: "I always look at the marginal taxpayer, the one that is worst off and still funding the bank, and ask myself if I were that person, could I afford five-star hotels and lavish receptions?"

The next few months will be a watershed in the short history of the EBRD. If deLarosiere does step down, he will be following his highly regarded deputy, the Wall Street banker Ron Freeman, to the exit. The bank's strategy will then have to be shaped by two different people. One of them, he says, will have to be a Wall Streeter for practical (and perhaps political) reasons - and it may go off in a new direction.

"If I decide to go, of course I will miss it. There are so many things to do," he says.

The meeting is just about over, and de Larosiere offers his hand at the office door, by a blue patterned rug with the EBRD logo on it. "A present from the people of Tajikstan," he says proudly. It turns out that this is the second rug they have supplied; the first, five years ago, was woven with an impressively accurate likeness of Jacques Attali in the middle.

"It's buried in one of our store rooms," says Barbara Clay, the press secretary. "Perhaps we should get it out?" she offers.

"Perhaps it is better left where it is," says de Larosiere, with just a hint of a smile.