Former CEO • Euroclear Bank
When Martine Dinne started work at Euroclear the Beatles were working on their last album, and Neil Armstrong was about to take one small step for man and one giant leap for mankind. The Beatles have broken up, and nobody goes to the Moon anymore, but Dinne reckons life has remained reassuringly constant in the clearing and settlement business over the intervening 38 years. “In 1969 we wanted to increase settlement efficiency by doing as many internal book-entry transfers as possible, and we still want to do the same thing today,” she says. “What has changed is the speed and complexity of what we do.” Back then book-entry meant exactly that (transactions were recorded in large cash books) and all but a fraction of the transactions settled were in one instrument (the fixed-rate Eurobond) denominated in a single currency (Eurodollars). “In those days, Euroclear was about nothing but Eurobonds, and Eurobonds denominated in US dollars,” she recalls. “The settlement cycle was not three days, but seven. It was all bearer bonds. Everything was in physical form. All processes were manual. Delivery-versus-payment was unknown. Securities were delivered free of payment in physical form in both the primary and the secondary markets.”
In the 1970s that process gave way to movements between accounts at Euro-clear, with bonds deposited in client accounts at custodian banks around Europe. But Dinne recalls that information continued to be exchanged by telex or fax until the mid- 1980s, and that electronic delivery-versus-payment was not introduced at Euroclear until 1984. That year also saw the introduction of EUCLID, now a private IP network used by Euro-clear participants, but then a proprietary communications system based on GE computer and telecommunications technology. Dinne recalls that the project manager was Luc Bomans, later general manager of Euroclear for six years between 1994 and 2000. His chief assistant was a young Jacques-Philippe Marson (now CEO of BNP Paribas Securities Services), and Albert Petersen (later an EVP at State Street) was Bomans’ manager. “EUCLID was introduced to meet the demand of clients for value-added reporting at a time when securities firms were not eligible for SWIFT membership,” remembers Dinne. “It eliminated the use of telexes in communication between us and them, and gave clients immediate access to information about matched and settled trades and their cash position.” Today, investment and custodian banks prefer to communicate with Euroclear via SWIFT, using EUCLID as a back-up. But EUCLID was essential in the 1980s because the earliest SWIFT securities message types did not begin to dominate communication between banks and brokers active in the securities markets until the early 1990s.
By then, says Dinne, Euroclear had long since expanded beyond it origins in the Eurodollar bond markets to settle transactions in domestic bonds, equities and mutual funds in multiple currencies. Ironically, for those who believe Euroclear is over-ambitious, Dinne recalls that the initial impetus for expansion into new asset classes was vulnerability rather than strength. It was the slowdown in Eurodollar bond issuance after the oil crisis of 1973-74 that prompted Euroclear to plunge into Yen, Deutschmark and Sterling bonds. The weak equity markets of 1974-75 had also closed down a promising new line in convertible Eurobonds. More importantly, a steeply inverted yield curve had made it hard to profit from underwriting and trading Eurodollar bonds. Euroclear found its traditional business had more or less disappeared. “We had to look at other currencies and products,” recalls Dinne. “It was the start of the diversification.” Bonds sold to domestic US investors (Yankees) and their British (Bulldogs) and Japanese (Samurais) equivalents were deposited in Euroclear, and swap-driven issues in relatively obscure currencies (such as the Kuwaiti dinar and the New Zealand dollar) became important. Domestic government bonds followed in the mid-1980s and equities from the 1990s. Euroclear began its assault on the inefficiencies of the European mutual fund market with the launch of FundSettle in November 2000.
“The range and complexity of the instruments we handle now has placed limits on our ability to automate,” says Dinne. “The plain vanilla Eurobond, which pays a coupon once a year and has no corporate actions is a thing of the past. The Euromarkets today are characterized more by structured products, and you cannot fully automate the entire information chain.” Which helps explain why Martine Dinne, who was one of a hundred people working at Euroclear in 1969, is now one of more than 3,000 who populate Euroclear offices in 14 locations worldwide. But Dinne was anything but a number by the time she retired in June this year. The 17-year-old Belgian school-leaver who took a job at the JPMorgan branch in Brussels 38 years earlier had become CEO of Euroclear Bank and one of just six members of the Management Committee of Euroclear SA/NV. That long ascent gave Dinne a privileged view of the entire history of clearing and settlement in Europe since the late 1960s. When she was assigned by Morgan to Euroclear in the summer of 1969, the clearing system was just six months old. It was set up in December 1968 as a department within the Brussels office of the Morgan Guaranty Trust Company of New York to solve the growing problems of secondary market settlement in the still-nascent Eurodollar bond markets.
Brussels was chosen more or less at random as a convenient Continental location, simply because UK law required the documentation of Eurobond issues-a business in which London was dominant-to be signed outside the UK. The organization had no identity separate from Morgan, recalls Dinne, with the general manager of the Morgan Brussels branch doubling as general manager of Euroclear. The ICSD did not get an independent chairman (the first was Rolf Hallberg of SEB) until it sold itself to its participants in 1972, and even then the first dedicated general manager remained a Morgan man: Bob Wilmers.
Today, Dinne can look back on a further seven general managers of Euroclear, including the tragically short reign of Peter Culver (1985-87), who died not only in harness but in her presence. Less unhappily, his death brought to Brussels the man to whom Dinne reckons she owes the most. Tom Ketchum, general manager of Euroclear between 1987 and 1991, not only promoted her to managing director but invited her to lead corporate strategy and product development. “I owe Tom a lot because he believed in me and gave me the opportunity to do something completely different, which I really loved,” says Dinne. “But you could say my earliest bosses were the most courageous ones because they promoted me despite the fact I did not have the right credentials. I was not a graduate and, on top of that, I was a woman.”
Certainly they were right to understand that practical experience is at least as valuable as knowledge, and that gender is irrelevant, for the decade (1987-1996) that Dinne spent in product development set Euroclear on the strategic course it has followed ever since. Its principal fruit was the June 1993 white paper “Beyond G30”, a spectacularly successful combination of academic insights (from a New York University professor), consultancy (from Price Waterhouse) and the real-world knowledge of Dinne and her colleagues.
Commissioned by Euroclear general manager John Olds (1991-94), it launched a debate about the structure of the European clearing and settlement infrastructure which reverberates still today in the discussions surrounding T2S. For Euroclear itself, “Beyond G30” proved a transformational document. Euroclear had suffered since its foundation from allegations that it was not simply an incipient monopoly, but an American one. The injured pride of Continental European banks was a major factor behind the establishment of Cedel-which later became Clearstream-in September 1970.
Two years later it prompted the sale by Morgan of its shares in Euroclear in return for a contract to operate the systems and supply banking services to participants. It proved an excellent deal for Morgan, which profited handsomely from providing credit, cash management and fee-based securities lending (introduced in 1976) services that enabled securities trading houses in London to avert settlement failures and cover short positions.
But by 2001 the arrangement with Morgan had become an obstacle to the wider ambition Dinne had outlined in Beyond 30 and a follow-up paper dubbed Hub and Spokes. Broadly speaking, that ambition amounted to a plan to consolidate the CSDs of Europe under the aegis of Euroclear. “None of this was possible until Euroclear was separated from Morgan,” says Dinne. The operating agreement was finally terminated in 2001, leading to the creation of Euroclear Bank as an independent, user-owned and user-governed depositary business.
The new structure cut Dinne adrift from Morgan for the first time since she had joined it 32 years before, but it delivered its expected benefits. 2001 saw Euroclear acquire the French CSD Sicovam. The Dutch CSD (Necigef) and the UK CSD (CRESTCo) followed in 2002, and the Belgian CSD (CIK) two years later. That consolidation had triumphed over the alternative “spaghetti model” of links between CSDs was a personal triumph for Dinne because she knew all about the limitations of links. She had negotiated the first with the Deutsche Kassenverein (DKV) in the mid-1980s, to support the growing Bund business of Euroclear. In the first half of the 1990s Dinne-who could remember the construction of the first rudimentary bridge between Euroclear and Cedel to facilitate transactions between accounts at either ICSD in 1972-also led the Euroclear team that rebuilt the electronic bridge between the two ICSDs over three consecutive rounds of negotiation from the early 1990s. The current structure and strategy of Euroclear is as complete a vindication of the future of the ICSD that Martine Dinne scripted a decade and a half ago as the politics of European clearing and settlement are likely to permit.
So Dinne leaves the industry secure in the knowledge that she made a difference. The difference she made to people counts for more. Euroclear has always valued efficiency, and it will probably never be known for its human touch, but Dinne always defied the archetype: She is respected within and beyond Euroclear for an unusual generosity of spirit. Among those touched by her collegiate approach, some of which remember it fondly enough to set aside real differences of commercial interest, are Charley Cock (BNP Paribas), Diana Chan (Citi), Mark Hoffman (later CEO of Dexia-BIL), Robert Boyd (later a securities lending maven at Dresdner Kleinwort), Paul Bodart (Bank of New York), Gary Link (later in prime brokerage at Citi), Mark Sheridan and Benoit Dumont (both in private banking at JPMorgan), Nadine Limbourg (SWIFT) and Herve de Montlivaut (now running Credit Suisse in Paris). It is no surprise to learn that it was Dinne who set up the first client relationship team at Euroclear in the 1970s: the origin of the Commercial Division she eventually ran as managing director, and where she battled hard (and not without success) to transform external perceptions of client service and relationship management at Euroclear. “I have not stopped servicing clients ever since I started work here,” she says. “Of my 38 years at Euroclear, I have spent 20 directly servicing clients.”
Dinne has another life planned now. She leaves Euroclear, on her own terms, four years before she is obliged to retire, with the time and the energy to pursue it. Refreshingly, Dinne does not plan to maintain any connection with the securities clearing and settlement industry other than the personal. “My life at Euroclear has always been about business,” she says. “Now I am planning to do all of the things I have not had time to do.” They include resuming the art, language and culinary studies that were interrupted in 1969, travel for pleasure, time for friends, social work, and helping to raise her nine-month-old grandson. “I was talking to a friend in the industry the other day, who said he had lots of ideas for me,” says Dinne. “I told him to put the ideas down in a book and that, if got bored, I would call him. My objective is not to do things I know a lot about, but to do things I know nothing about.” That willingness to take on new challenges was at the heart of the long and successful career of Dinne. The price the industry will pay for that insatiable appetite for life is that Dinne will no longer be around to share her vast knowledge and experience with a new generation of people inside and outside of Euroclear as readily and openly as she always did. She set the highest standards, without sacrificing her natural friendliness and approachability. She expected people to meet those, but was blessed also with the gifts that inspired them to do so. A great many of the people in senior positions in the industry today count themselves lucky to have known or to have worked with or for Martine Dinne. -DSH
This profile originally appeared as “Ave atque vale, Martine” in Global Custodian, Fall 2007.