The Risk Controllers: Central Counterparty Clearing in Globalised Financial Markets

17

LCH.Clearnet Under Threat

17.1 DAVID HARDY DEPARTS

On 5 July 2006, David Hardy resigned as chief executive of LCH.Clearnet at the insistence of the group's board. His departure after 19 years with LCH followed the failure of a big IT project, the Generic Clearing System (GCS), and reflected the group's inability to integrate the London Clearing House and Clearnet businesses two and a half years after their merger.

Hardy's resignation was the most dramatic event thus far in a worsening crisis at LCH.Clearnet. That day was also the last day for the chairman Gérard de la Martinière whose decision to step down had been announced some seven weeks earlier.

Chris Tupker, chairman of Euroclear, was drafted in to take de la Martinière's place with effect from 10 July. Two weeks after taking the LCH.Clearnet chair, Tupker appointed Roger Liddell, a former Goldman Sachs managing director, as chief executive of the LCH.Clearnet Group. One of the first acts of the new team was to write off the full €121.3 million cost of GCS.¹

The costly IT failure had much in common with other failed computer projects that had punctuated the development of financial infrastructures since the marriage of computers and markets in the 1960s. Hardy commissioned GCS to integrate the many different clearing platforms and risk-management systems inside the LCH.Clearnet Group. Overburdened with consultants and lacking adequate management controls, the GCS project ran into difficulties some time before Hardy's forced ...