November 2010: Bloomberg Interviews Evelyn de Rothschild - Geared Up Beyond Rational Thinking - Downfall of the Euro and the European Union

Nov. 23, 2010 (Bloomberg) -- Financier Evelyn de Rothschild talks about the outlook for Ireland's banking industry and the spread of the European sovereign debt crisis. He speaks with Bloomberg's Mark Barton during the Bloomberg Businessweek European Leadership Forum in London. (Source: Bloomberg)



TRANSCRIPT

Bloomberg: Sir Evelyn de Rothschild joins me now: thank you very much for joining us today.

Evelyn de Rothschild: I am delighted.

Bloomberg: I've got to talk about the subject of the day, which of course, is Ireland. And now the spotlight seems to be turning to other peripheral European countries, such as Portugal and Spain. Do you think it's only a matter of time before Portugal asks the E.U. for aid?

Evelyn de Rothschild: Well, I think this has been going on a long time. I mean, we started with Greece; at the same time, we knew that Spain was having its problems in the property market, and Portugal was too. Uh, we always mention Italy; but Italy has been like this for 40 years: so you don't think to worry too much about that. Uhm, I think it's difficult to say until we see the details. Uhm, let's see how we get out of Ireland, and see what happens.

Bloomberg: Do you think that Europe – the European project – is at risk here? I mean, some say that countries such as Greece, such as Portugal, such as Spain, might eventually have to leave the euro project. I mean, do you see that eventuality?

Evelyn de Rothschild: Well, we're not members of the euro –

Bloomberg: Of course.

Evelyn de Rothschild: – and nor is Norway.

Bloomberg: Yeah.

Evelyn de Rothschild: But of course, Norway has the great amount of oil and opportunity from a different point of view. But you know, people are so anxious to see a downfall of the euro or the European Union: I think it's wrong. If I may say something that made me rather sensitive: Have you looked at the problems of the United States? Have you looked at how many of the actual states of the United States are bankrupt? California; Michigan; uhm... What about the breakup of the United States, if you look at it comparing to what's happened in Europe?

Bloomberg: I mean, you, I listened to your panel downstairs; and you were talking about protectionism. And you highlighted France and the U.S.: I mean, you said these are probably two of the most protectionist nations –

Evelyn de Rothschild: But do you want us to be careful when you say that? That's from a trading point of view –

Bloomberg: Of course: yeah.

Evelyn de Rothschild: – and from an investment point of view. But no: what I was saying from a point of view of the structure – of the financial structure of Greece, the financial structure of the banks in Ireland, as you've seen. I mean, one of the things which is very remarkable in my life, is it's taken so long for people to deal with the subject. I mean, ah, I, you have to give credit to Gordon Brown, rightly or wrongly, that he took a very quick action on nationalising our two major – or three major banks in this country, and trying to sort the thing out. Now, the banks shouldn't have got themselves into that trouble; the Irish banks are too big for the country. I mean, RBS has a big stake in Irish banks too –

Bloomberg: Of course.

Evelyn de Rothschild: – and they'll lose more money; so....

Bloomberg: I want to ask you a question: and putting on your former role as an investment banker at N M Rothschild. A number of rules have been implemented by Basel; and as part of that, banks will have to hold more capital. But many are criticising Basel, saying lending will be reduced to corporates and to consumers, and it's going to slow economic growth. Are you a supporter of Basel III – or are you a critic?

Evelyn de Rothschild: No, I think that it's the right thing to do. You've heard Mervyn King say very strongly that we have to have a bigger capital base. I think we, we weren't a commercial bank: so it was different. But I think, if you are a customer, you want to have your money safely looked after. And I think that one of the confidence factors that was deteriorated, was when it was found that the banks were geared up beyond rational thinking. And quite frankly, uhm, it went to a great excess. You talk about Basel: don't forget that one of the biggest examples of a bank which – to me – was highlighted, is the wonderful, most prominent banking institution in the world, was UBS. And it was geared up to something like 70 or 80 times. So, what do you do? Do you allow that to happen – or do you get a proper base into a bank?

Bloomberg: Sir Evelyn de Rothschild: thank you very much for joining us today.