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Bonds without Borders: A History of the Eurobond Market by Chris O'Malley

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Postscript

On 24 June 2013 the International Capital Market Association invited over 300 market participants, both past and present, to a black-tie dinner at The Savoy Hotel, London, to celebrate the 50th anniversary of the Eurobond market. The dinner was addressed by an eminent group of market veterans. Peter Spira, originally of S.G. Warburg, spoke most poignantly, as the sole survivor of the team at Warburgs that organised the original Autostrade transaction. Stanley Ross, in his own inimitable forthright style, spoke of the late 1960s bond settlement crisis and the foundation of the AIBD.*

Eugene Rotberg, formerly Treasurer of the World Bank and a party to the first ever swap transaction gave the most pithy presentation of the evening; a condensed history of market developments and, somewhat tongue-in-cheek, responses as to how the industry adapted to cope with them. He gave a version of a speech he had delivered on a number of occasions:

We made mistakes. How did we hide them?

Answer: Off balance sheet trades or we didn't mark to market….

How to avoid reporting losses?

Answer: For banks, keep lending to a non-paying borrower so it could pay interest. The principle was straightforward. ‘A rolling loan gathers no loss.’

How to lend without fear of the capacity of borrowers to repay?

Answer: Securitise. Package the asset. Get rid of it fast. Not to worry about prudential lending.

How to compete?

Answer: In the US, repeal Glass Steagall, and, develop an asymmetrical compensation ...

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