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Bill Rhodes: European Banks Will Be Challenged By Brexit(Audio) · Bloomberg Intelligence

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  Speaker 1: You're listening to Taking Stock with Kathleen Hay and Pim
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  Speaker 1: Fox on Bloomberg Radio. The startling decision to pull out
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  Speaker 1: of the European Union setting off a cascade of aftershocks,
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  Speaker 1: costing Prime Minister David Cameron his job, plunging the financial
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  Speaker 1: markets into turmoil and leaving the UK's future in doubt.
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  Speaker 1: That decisive win by the Leave campaign exposing deep divides.
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  Speaker 1: So can central banks, trade and finance ministers around the
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  Speaker 1: world do anything to calm financial markets? Here to tell
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  Speaker 1: us more, Bill Rhodes, President, Chief Executive William R. Rhodes
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  Speaker 1: Global Advisors. Bill Rhodes, always a pleasure and thank you
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  Speaker 1: for coming into the studio. Well, it's great to be
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  Speaker 1: with you guys on this important occasion because I think
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  Speaker 1: it is very important. Fortunately for the UK, they've got
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  Speaker 1: Mark Karney there who's battle tested, as you know he
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  Speaker 1: uh in his career, Uh, he worked for Goldman Sage.
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  Speaker 1: He understands the private sector. Uh and uh he also
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  Speaker 1: during the Great Recession ran the Bank of Canada. But
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  Speaker 1: very importantly he runs a financial stability board and so
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  Speaker 1: he's got a lot of cloud. He's a very smart guy.
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  Speaker 1: And UH, if you want anyone running your central bank
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  Speaker 1: when the politicians don't know what to do, it's Mark Arney.
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  Speaker 1: And then I think, also you've got Mario drag you
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  Speaker 1: at the e c B. So you've got two real
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  Speaker 1: pros doing this because obviously the politicians are complete disarray
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  Speaker 1: in the UK. You know, I just want to jump
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  Speaker 1: into the bill because politicians in disarray. We get that,
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  Speaker 1: But at this point about Mark Arney, aren't you glad
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  Speaker 1: to have him there? If you're Boris Johnson, who is
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  Speaker 1: a House of Commons Member of Parliament, But as you said,
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  Speaker 1: most popular politician right now in London, in in UK
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  Speaker 1: for many people. One of our guests said, why would
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  Speaker 1: you want to keep Mark Arney around? Because the opposition,
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  Speaker 1: the Breggsit people were saying the Bank of It's skewing
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  Speaker 1: its analysis of how hard this would hit the UK economy.
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  Speaker 1: They're playing politics, They're trying to affect the vote. They
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  Speaker 1: want people to vote to stay. So Boris Johnson's he's political,
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  Speaker 1: he's smart. Does he maybe make some noises publicly, but
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  Speaker 1: let Mark know, hey, I realize, let's put that behind us.
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  Speaker 1: We've gotta keep you k together. Now there's gonna be
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  Speaker 1: a lot of instabilities. He is he smart enough to
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  Speaker 1: say maybe his best bet is to make sure that
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  Speaker 1: Carney stays at the helm of the Bank of England.
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  Speaker 1: I think, Uh, you never want to under a underestimate.
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  Speaker 1: Boris Johnson is a very shrewd operator and what he
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  Speaker 1: wants now is is confidence to return. He wants stability.
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  Speaker 1: That's why he's signed off. Uh. You know that memo
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  Speaker 1: of Conservative MPs to keep Cameron in for the moment.
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  Speaker 1: So he obviously wants the best person in that job.
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  Speaker 1: Forget about what was said before. What counts now is
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  Speaker 1: what happens now and what happens tomorrow. And so he
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  Speaker 1: will be a big advocate of doing the right thing
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  Speaker 1: because if things go the wrong way, who are they
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  Speaker 1: going to blame Boris Johnson? Because there's no doubt in
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  Speaker 1: my mind from a trip I took their to UK
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  Speaker 1: a couple of months ago talking with my English friends, Uh,
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  Speaker 1: is that Boris Johnson, the most popular politician in the UK,
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  Speaker 1: made all the difference in the world. Without Boris Johnson,
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  Speaker 1: you wouldn't have had this vote without a doubt. And
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  Speaker 1: so it rests very much on his shoulders. And sure
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  Speaker 1: he wants to be Prime minister, but he wants to
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  Speaker 1: get in there, uh, with an ability to calm the
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  Speaker 1: situation and do the right thing. Bill Rhodes, the French
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  Speaker 1: Prime Minister Manuel Vows has said that at stake is
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  Speaker 1: the breakup, pure and simple, of the European Union. Now
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  Speaker 1: is the time to invent another Europe on Gla Merkel
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  Speaker 1: today saying that it is a turning point for the
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  Speaker 1: European unification process. What do they mean by that, Well,
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  Speaker 1: we're gonna find out pretty soon. I think Volves, who
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  Speaker 1: I've gotten to know, is a very common but in person,
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  Speaker 1: he's the most competent person they've had in that role
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  Speaker 1: for some time. And he's the one who's pushing the
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  Speaker 1: you know, revision of the labor laws. He's the one
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  Speaker 1: who convinced Oland, which is what France needs because you
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  Speaker 1: saw that they're manufacturing uh dropped and uh their overall
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  Speaker 1: uh you know, growth is starting to slow again after
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  Speaker 1: a very good first quarter. Uh. I don't think that
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  Speaker 1: the leaders of of the Eurozone and the rest of
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  Speaker 1: the European Union really know what they want to do
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  Speaker 1: at this point in time, and that's something they're going
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  Speaker 1: to have to decide over the coming days. And UH
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  Speaker 1: in weeks and as we know, we have elections next
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  Speaker 1: year in France and you have elections in Germany. You
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  Speaker 1: already having real le penn talking about a referendum. UH.
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  Speaker 1: Wilder's in Holland talking about one, and various parties in
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  Speaker 1: UH in Italy. So I think the UH, the EU
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  Speaker 1: has got to get its act together in the euro Zone.
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  Speaker 1: UH has to get its uh it's act together on
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  Speaker 1: how they want to handle it. I think it suits
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  Speaker 1: everybody to have a a very positive negotiation out because
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  Speaker 1: let's face it, UH, Europe sells a lot to the
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  Speaker 1: UK and UH for the UK, everyone is so negative now.
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  Speaker 1: But with a weaker pound, manufacturing exports will benefit. Also,
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  Speaker 1: tourism into the country will benefit. So I don't think
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  Speaker 1: it's all quite the doom and gloom that everybody thinks.
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  Speaker 1: It will depend on who becomes prime minister and how
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  Speaker 1: they negotiate their way out of this. So I think
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  Speaker 1: that's what's gonna tell the tale going forward. So Boris
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  Speaker 1: Johnson isn't a slam dunk to be the next prime minister, UH,
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  Speaker 1: not necessarily, He's obviously the favorite, but UH, you know
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  Speaker 1: this party, the Conservative Party, has been very Uh, you know,
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  Speaker 1: I think ripped apart over this issue, and they're lot
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  Speaker 1: of strong feelings and uh, he will have to assuage
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  Speaker 1: those who wanted the remain side that he is the
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  Speaker 1: best one to run the country. So I think nothing's
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  Speaker 1: for sure at this particular, uh point in time, but
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  Speaker 1: I think it suits both parties, Europe and the UK
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  Speaker 1: to have a negotiation. Uh that's done in a positive
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  Speaker 1: fashion because they both need each other still going forward.
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  Speaker 1: This is taking Stock with Pim Fox and Kathleen Hayes
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  Speaker 1: on Bloomberg Radio. We continue our conversation now with Bill Rhodes,
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  Speaker 1: head of William R. Rhodes Global Advisors. He's a former
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  Speaker 1: vice chair of City Group. He is the author of
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  Speaker 1: Banker to the World, Leadership Lessons from the front Lines
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  Speaker 1: of Global Finance. Bill's got into the area of restructuring
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  Speaker 1: indebted nations back in the eighties when he helped work
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  Speaker 1: out the Latin American debt crisis, and his book is
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  Speaker 1: all about all the kinds of negotiations he did. Maybe
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  Speaker 1: Bill should people should be reading your book as the
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  Speaker 1: UK gets ready to deal with the European Union. Well,
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  Speaker 1: I'm I'm sure it's going to be quite a negotiation.
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  Speaker 1: And uh. I also uh thinking we uh, we're just
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  Speaker 1: talking offline here about the banking situation uh in the UK,
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  Speaker 1: in the UK and the EU and the Eurozone. And
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  Speaker 1: uh obviously the retail banks in the UK got hit
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  Speaker 1: real hard today, you know, Barclay's, Lloyd's, Royal Bank of Scotland. Ah,
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  Speaker 1: because of the concern over what's coming next. But I
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  Speaker 1: think one of the things that you're going to see
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  Speaker 1: the French starting to push, and this is going to
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  Speaker 1: be a problem with Germany, is to finalize the banking
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  Speaker 1: union in the Eurozone because as you know, they're there
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  Speaker 1: are large parts of that banking union that have never
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  Speaker 1: been finalized. And I think given all that's going on
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  Speaker 1: the French you're gonna push that very hard. It will
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  Speaker 1: be very interesting to see how that works out. Ah.
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  Speaker 1: And we have the Spanish elections on Sunday, and most
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  Speaker 1: people have seemed to forget about that, but I think
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  Speaker 1: the Spanish elections are going to be very very important
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  Speaker 1: also to see what sort of, if any fallout from
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  Speaker 1: Brexit you're going to have on those elections, because the
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  Speaker 1: polls are showing that ROHOI and the Partido Popolata the
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  Speaker 1: Popular Party, the Conservatives would get the vote and the
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  Speaker 1: Left would get slightly left less than that, and then
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  Speaker 1: uh you have some medium you know, middle of the
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  Speaker 1: road parties. They're getting some and so it's not clear
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  Speaker 1: that anyone's going to emerge as a winner. And this
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  Speaker 1: issue of Brexit obviously has an impact on Spain because
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  Speaker 1: as we know, Catalunia wants to leave. And in addition
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  Speaker 1: to that, people are now talking, as you know about
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  Speaker 1: the comments of Premiers Sturgeon up in Scotland saying that
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  Speaker 1: it may be necessary, uh, depending on how this negotiation
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  Speaker 1: works out with the Eurozone and the UK, to have
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  Speaker 1: another referendum on on Scotland to stay or leave, because
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  Speaker 1: over I think it was seventy of the votes in
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  Speaker 1: Scotland for remaining. That was the strongest area in the UK.
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  Speaker 1: And so I think there's so many ramifications here and
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  Speaker 1: uh so I think what's very very important. First of
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  Speaker 1: all here is as we talked about, is to make
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  Speaker 1: sure you've got enough liquidity in the markets. I think
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  Speaker 1: this is where Mark Karney uh will be very good
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  Speaker 1: on bringing some confidence back. But second of all, there
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  Speaker 1: has to be a process set up as soon as
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  Speaker 1: possible about the negotiation arrangement with the UK, and very
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  Speaker 1: very importantly, I think the Conservative Party has to decide
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  Speaker 1: who the next Prime Minister is going to be. All
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  Speaker 1: of that would bring some sort of confidence back and ability. Otherwise,
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  Speaker 1: I think we're in for a rough ride over the
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  Speaker 1: next weeks and months visa V volatility, not just in
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  Speaker 1: Europe but obviously worldwide. Look what happened here in the US,
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  Speaker 1: Look what happened in the Asian markets. And we shouldn't
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  Speaker 1: get China because China's got pretty plenty of problems on
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  Speaker 1: its own, including this tremendous debt that keeps rising in China,
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  Speaker 1: and so I think that you can say the world
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  Speaker 1: is replete with problems. What we need is leadership. I
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  Speaker 1: was gonna say civilization and its discontentedness at least right now,
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  Speaker 1: as opposed to as discontent. I just want to give
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  Speaker 1: you the figures because you mentioned the Royal Bank of
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  Speaker 1: Scotland shares down more than eighteen percent today, Standard Charter
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  Speaker 1: down two and a half percent, Lloyd's Banking Group down
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  Speaker 1: twenty one, Barkley's down more than seventeen per cent. I
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  Speaker 1: want you to turn your attention to an event that
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  Speaker 1: is taking place on Monday June, the Brenton Woods Committee.
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  Speaker 1: This is the spirit of Breton Woods multilateral leadership in
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  Speaker 1: turbulent times. Speak a little bit about why you see
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  Speaker 1: this discontent among voters in Spain as you just referenced,
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  Speaker 1: also SISA Party in Greece, Italy's Five Star Movement. Where's
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  Speaker 1: this discontent coming from and what's the subject of this
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  Speaker 1: Breton Woods Committee meeting and obviously what we're seeing in
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  Speaker 1: France and Portugal too. I'll be chairing the meeting, and uh,
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  Speaker 1: we're very fortunate to have a Secretary, lou Will, who
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  Speaker 1: will be giving his first formal statements on the question
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  Speaker 1: of Brexit at this conference first thing in the morning.
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  Speaker 1: Later on, we also have Mike Frohman, who's our trade
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  Speaker 1: secretary and this is very very important as to how
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  Speaker 1: we're gonna handle this relationship with the UK on the
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  Speaker 1: trade side. And uh, we also have the number two
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  Speaker 1: persons of the first Deputy Managing Director of the I
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  Speaker 1: m F and the meeting will be at the I
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  Speaker 1: m F H David Lifton, to talk about all of
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  Speaker 1: these issues. So I think it's a very important event
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  Speaker 1: coming at this particular time, and obviously the top of
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  Speaker 1: the list is going to be Brexit. Well it's interesting,
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  Speaker 1: that's the Breton Woods conference, which was historic in its
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  Speaker 1: own way. Um, is this potentially build this, this EU voting,
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  Speaker 1: UK voting to leave the EU? Is this potentially some
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  Speaker 1: turning point? Are we gonna look back and say, see
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  Speaker 1: that's where it started or that's where we realized that
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  Speaker 1: the world had gone you know, a d eighty degrees
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  Speaker 1: from one point to another. Well, I think this is
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  Speaker 1: very representative of the unhappiness you see among the voting
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  Speaker 1: population in the so called Western world. We see it
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  Speaker 1: all across Europe, not just in the UK. And uh
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  Speaker 1: that's coming out of the Great Recession, the debt crisis,
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  Speaker 1: and the Eurozone voters are very very unhappy. And you
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  Speaker 1: take a look at this country. Uh, Ernie Sanders who
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  Speaker 1: was basically an unknown uh senator uh from Vermont and
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  Speaker 1: Donald Trump who two years ago no one would have
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  Speaker 1: thought that Donald Trump would be the candidate for the
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  Speaker 1: Republican Party. Let's say a year ago they wouldn't have
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  Speaker 1: And this is all also the discontent about you know,
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  Speaker 1: where the economy is going. Uh, you know what's going
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  Speaker 1: on on inequality, all of these issues I think are
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  Speaker 1: replete with in the Western world, and the way ahead
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  Speaker 1: here is to get firm leadership is how we're going
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  Speaker 1: to work these issues. And frankly, we haven't seen the
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  Speaker 1: leadership in the Western world. Well, I guess it's ironic
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  Speaker 1: that Freud wrote Civilization and It's discontents. He wrote it
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  Speaker 1: in n I want to thank you very much Bill Rhodes.
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  Speaker 1: He is the president and the chief executive of William R.
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  Speaker 1: Rhodes Global Advisors. And also just on a personal note,
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  Speaker 1: I want to extend to Bill Rhodes our deepest sympathy
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  Speaker 1: and condolences on the passing of his dear wife. Bill
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  Speaker 1: has been a valuable guest here at Bloomberg and we
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  Speaker 1: extend our thanks and we look forward to his continued participation.
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  Speaker 1: Many thanks, Thank you, Bill Rhodes. You're listening to Taking Stock.
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  Speaker 1: I'm pim Fox my co host Kathleen Hayes. You're listening
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  Speaker 1: to Brexit coverage on Bloomberg Radio.