CREST Faces Reality Of Acquisition As Euroclear Divides Up Post-Merger Jobs

Euroclear, whose acquisition of CREST is currently the target of a fierce lobbying campaign in Brussels, today pressed on with making it a reality by confirming the division of the executive jobs. Since the division of the spoils at the

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Euroclear, whose acquisition of CREST is currently the target of a fierce lobbying campaign in Brussels, today pressed on with making it a reality by confirming the division of the executive jobs. Since the division of the spoils at the board level was agreed at the time the merger was announced in July, the allocation of people to roles where they will actually have to do the work will be pored over with interest by the Kremlinologists of the securities services industry.

CREST is generally agreed to have acquired a generous slice of board level jobs, parlaying a mere 19 per cent shareholding in Greater Euroclear into four out of twelve seats on the board of Euroclear Bank (the old ICSD business), seven out of twenty-six on the board of Euroclear plc (the holding company for the old ICSD and the new CSD businesses), and the deputy chairmanship of both (in the shape of Sir Nigel Wicks).

At first blush, they have not done so well on the real jobs. CREST got 33 per cent of the Euroclear Bank board seats and 27 per cent of the Euroclear plc board seats. But they have secured only one seat out of six (17 per cent) on the Euroclear Bank Management Committee, the previously informal senior management group which is now formally constituted for the first time. Hugh Simpson, Chief Executive of CRESTCo, joins Pierre Francotte, Chairman of the Management Committee and Chief Executive Officer of Euroclear Bank, Ignace R. Combes, Vice Chairman of the Management Committee, Martine Dinne, the former head of the commercial division at Euroclear, Jol Mrre, Chief Executive Officer of Euroclear France, and Theo Van Engeland.

Fair enough, the disinterested observer might think: after all, CREST is not meant to be in the ICSD business, and Sicovam has only one representative on the management committee too (Joel Merere). But the management committee is nevertheless the real power centre in Greater Euroclear, as it was in Euroclear. Indeed, each of the managing directors of the newly formed cross-company business or operational divisions will report to one of the six members of the management committee. And CREST supplies only three – Mike Taylor, Mark Kirby and David Wyatt – out of the sixteen divisional heads (19 per cent of the whole).

As it happens, this proportion corresponds exactly to the size of the CREST stake in Greater Euroclear, and can therefore be seen as fair. It can also be argued that a CREST alumnus (David Wyatt) is running one of the two new divisions (Single Settlement Engine) which will decide the pace and style of the integration process, as agreed at the time the merger was announced. But the other – Business Delivery and Integration – is arguably more important in terms of influence over the future structure of the company, and it will be run by a longstanding Euroclear executive, Yves Poullet.

In fact, the creation of cross-company divisions for the first time is a sign that the integration of the CSDs will bite into the autonomy of Sicovam (already known as Euroclear France) for the first time, as well as CREST (to be known as Euroclear United Kingdom from 2005). Until now, the CSD has been left to its own devices, even where functions were duplicated. Quite how this degree of integration at executive management level squares with the disintegration promised at the upper level – to deflect criticism that bundling commercial and utility businesses is unfair to competitors which have to use the CSDs – remains to be seen.

However, the heads of the sixteen operating divisions are: Bernard Boyette (Application Development); Paul Taylor (Audit); Mike Taylor (Banking); Yves Poullet (Business Delivery & Integration); Yannic Weber (Commercial); Anso Thire (Corporate Strategy & Public Affairs); Michael Pilkington (Corporate Technology); Frdric Hannequart (Financial); Guy Schuermans (Human Resources); Kristen Geyer (Legal); Wim Claeys (Operations & Network Management); Mark Kirby (Product Management-Equities); Pierre Slechten (Product Management – Fixed Income, Funds and Collateral Management); Vincent Gros (Product Management – Issuer Services); Peter Sucaet (Risk Management) and David Wyatt (Single Settlement Engine).

Also as expected, the CRESTCo Board of Directors swaps its current chairman for Pierre Francotte. Sir Nigel Wicks, the outgoing chairman of CRESTCo, ascends to heaven as Deputy Chairman of Euroclear plc and Euroclear Bank, both of which will continue to be chaired by Euroclear’s Chris Tupker. Hugh Simpson and David Wyatt remain on the CRESTCo board, but are joined by Martine Dinne and Theo Van England from Euroclear Bank’s Management Committee. All of which suggests that maintaining the autonomy of CREST is already a non-issue.

Importantly, the two independent directors of the CRESTCo board were named today as Herschel Post and Geoffrey Turner. Post, who will chair the important Audit and Compliance Committee, is currently President of Christie’s, a fine art auction house – but his qualifications for the job at Euroclear include Chief Executive Officer and Deputy Chairman of Coutts & Co U.K., Chief Operating Officer of Lehman Brothers for Europe and the Middle East, and Deputy Chairman of the London Stock Exchange. Geoffrey Turner, by contrast, is currently Chief Executive of The Securities Institute. Previously, he has served as Chief Executive of the Association of Private Client Investment Managers and Stockbrokers (APCIMS), Director of Public Affairs for The Securities and Futures Authority (SFA), and as Director of the London Stock Exchange.

With minority positions at board and operational level, and Nigel Wicks playing second fiddle to Chris Tupker in the battle of the chairmen, and a Euroclear encampment already established on the CREST board, a crude Kremlinological assessment suggests that CREST will exert less influence at the operational level within Greater Euroclear than its denizens suggested at the time the merger was announced. But it is still early days.