FX Markets

Girozentrale Exits London Interbank FX Market 10-Year Operation Falls Victim To Streamlining

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In an attempt to streamline operations, Austrian-based Girozentrale und Bank der oesterreichischen Sparkassen AG (Girozentrale), discontinued its foreign exchange and money market trading operations in London on November 14.

"We're transferring the interbank business to Vienna and New York," says Roderick Chamberlain, general manager of Girozentrale's London branch. Girozentrale's London branch has had an active foreign exchange trading operation since 1979.

Although Chamberlain says that the desk had one of its best years ever, "if you think about the support costs of having a full-service dealing room in London, in addition to a full-service dealing room in Vienna, it's an unnecessary duplication."

Even though the schilling has never been an extremely liquid currency, few appear concerned that Girozentrale's departure will chill activity further. Analysts say that London's proximity to Vienna, coupled with the presence of two other large Austrian-based banks, Creditanstalt Bankverein and Osterreichische Landerbank, will likely keep schilling activity in London at current levels.

Late Nights in New York

The bank has already adopted extended hours in its New York branch, sources there say. Over the past two years, Girozentrale's New York branch has been operating in the foreign exchange markets until 3:00 a.m. via staggered shifts in order to offset its lack of branch networks, one source says.

Although the Austrian schilling is the bank's featured currency, Girozentrale's seven-person foreign exchange trading operation in New York manages currency books in Deutsche marks, pounds and yen and engages in cross-rate trading of those currencies against the schilling.

Corporate Desk to Remain

While the bank has stepped out of the foreign exchange interbank market in London, sources there say that the bank will continue to service corporate clients from London via its two-person corporate desk. Girozentrale's corporate desk will receive price support from its remaining treasury centers in Austria and New York.

This is the second bank that has opted to pull out of the London interbank market this month. Pittsburgh-based Mellon Bank chose to close its London interbank foreign exchange trading desk in the first week of November (FX Week, November 9). John O'Driscoll, a general manager at Mellon's London office, said at the time that the bank "did not see, given present market conditions, that foreign exchange trading [in London] would be a significant contributor to profits."

It appears that banks are finding it increasingly difficult to generate profits from their satellite foreign exchange divisions. A dealer at Generale Bank, which recently pared its interbank FX department in London, complained that spot interbank trading in London had suffered from an overall decline in turnover. Generale now plans to focus on corporate business instead (FX Week, September 28).

20 Affected

"[The banks' decision] has meant the end of the road for 20 people, which is not very pleasant," says Chamberlain. Of the 20 affected, a source at the bank says 12 were currency dealers. However, three of those affected, who are expatriates, will be transferred to the bank's head-office in Vienna or its New York branch.

A source at the bank says Eddie Haffner, who was transferred to the London branch earlier this year from the New York office and was functioning as its treasurer, will return to New York in a role which has not yet been defined.

In addition, Dawn Balliet, a forward and FRA trader, will be transferred back to New York, where she initially worked, a source at the bank says. Peter Wais, a trader engaged in interest-rate swaps will be dispatched to the bank's Vienna office.

The bank, which has total assets of $25 billion, decided to revamp its London operation after several key changes were made at the bank earlier this month. On November 1, Herbert Lugmayr was appointed deputy chairman of the bank, replacing Rudolf Fiala, who retired. Management also decided to merge its domestic and international divisions.

Prior to the merge, Fritz Anton was head of its domestic lending group, which was also responsible for lending to Eastern Bloc nations and Anthony Burghart was in charge of the bank's international unit, a source at the bank says.

But now Burghart is responsible for its international lending business, and Anton is in charge of global treasury, the source says. Fritz Ramberger, previously global treasurer, continues to work in global treasury, but now reports to Anton.

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