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The massacre at the offices of Charlie Hebdo diverted the attention of the entire world to Paris. All other news was relegated to the back pages, as for television all other events were eclipsed.
It was Charlie Hebdo around the clock, only the football results got a brief peek-in as the events of the day and the week were run and rerun to the point viewers were mesmerised by the horror.
Never had there been a better moment for Her Majesty's Government to brush the INI grab under the carpet as Britons were concentrated on the images of their Prime Minister elbowing his way down boulevard Beaumarchais in Paris alongside an attractive blonde ‒ who viewers soon discovered was Helle Thorning-Schmidt, the Danish Prime Minister.
Meanwhile, back in London, the Chancellor finished sewing up Michael Fitzwilliams. Faced with serious losses, INI had effectively been under capitalised with little hope of help from its owners, starting with the Fitzwilliams family.
As for Tarasov, he had gone to ground.
Moscow wasted no time and following the example of London, put INI’s Moscow unit under the direct control of the Bank of Russia, which was not about to help bailing out Fitzwilliams’ City of London bank.
The pressure on the British Chancellor was twofold. The INI Banking Corporation, was not the only UK bank to be feeling the heat from the commodities slide. Another bank, more important, was also facing serious difficulties: Standard Chartered. This in addition to the election calendar explained the government’s rush to prevent contagion. Standard Chartered was looking at four and a half billion dollars in additional provisions and the need to raise billions in fresh cash from investors. It was significantly larger than Fitzwilliams’ bank with assets of six hundred and fifty billion pounds sterling.
INI looked good on paper, but it was in fact highly fragmented. Its very recent creation had not allowed Fitzwilliams the time to consolidate its different and dispersed holdings, which were dotted across the globe: Dublin, London, Amsterdam, Moscow and Hong Kong. In addition were the Fitzwilliams family held offshore banking interests in the Caribbean.
As far as the Governor of the Bank of England was concerned the only solution had been recapitalisation and the only suitable candidate in his view was the City & Colonial, ranked amongst the world’s top ten banks, which could absorb Fitzwilliams’ bank without indigestion. Sir Alec Hainsworth, CEO of the City & Colonial, saw his intervention as a favour to the government, a means of leverage on David Cameron, the Conservative Prime Minister, and his campaign to keep Britain in the EU.
From Hong Kong, Pat Kennedy regarded the City & Colonial and Standard Chartered banks as heavily over-engaged in Chinese and in Asian markets, and both ran the risk of serious exposure if the Chinese economy got into real difficulties as many expected it would.
Given the risk of political and economic changes in Hong Kong, the Peoples Bank of China would call the shots, and if ever the former colony’s status was modified by Beijing, for example in favour of Shanghai, the London based banks would be hurt, whereas INI Hong Kong, which was effectively a local bank, would see its status enhanced, opening up vast possibilities in Mainland China.
Western governments functioned on short term agendas, the next election always in view. They did not have the luxury of an arranged result as was the case of Moscow or Beijing. The UK parliamentary calendar meant the Prime Minister’s present considerations were short term, very short term. With a general election just four months away, the outcome of which was more than uncertain for the incumbent Tory government, risks were to be avoided at all costs.
Hainsworth, recently appointed CEO of City & Colonial, had been chosen for his strong City background, however, critics saw him more as a company man than a strategist, and lacking sufficient international experience. His nomination, was a marked change from the bank’s previous appointments: men with solid backgrounds in East Asia.
Beyond political considerations, Hainsworth’s interest in INI, lay in the good profitability of its different units, and its valuable property portfolio in London. Moscow was another kettle of fish. INI’s link-up with InterBank had been promising and to his mind the default of Yakutneft could have been avoided with a little flexibility on the part of Tarasov. What Hainsworth did not see however was the Kremlin’s machination to bring down the oligarch. His experience with Russia was extremely limited to say the least. Sanctions he perceived as being essentially the work of Washington and imagined, given the weight of City & Colonial, he could with a few shrewd manoeuvres circumvent these, finding a mutually profitable arrangement with Moscow.
As a banker Hainsworth viewed political meddling as non-productive to profit making, though in this particular case it suited his plans. In his view the Kremlin would welcome a positive solution to a problem they saw as being of Tarasov’s making.
All in all the windfall, as he called it, was not a bad deal for City & Colonial, and the recapitalisation of INI could be balanced by the sale of its business activities that did not fit in with his plans. The effect on City & Colonial’s balance sheet, considering its assets of nearly two trillion pounds sterling, would be inconsequential.