Bill Rhodes: European Banks Will Be Challenged By Brexit(Audio)

world do anything to calm financial markets? Here to tell us more, Bill Rhodes, President, Chief Executive William R. Rhodes Global Advisors. Bill Rhodes, always a pleasure and thank you for coming into the studio. Well, it's great to be with you guys on this important occasion because I think it is very important. Fortunately for the UK, they've got Mark Karney there who's battle tested, as you know he uh in his career, Uh, he worked for Goldman Sage.

He understands the private sector. Uh and uh he also during the Great Recession ran the Bank of Canada. But very importantly he runs a financial stability board and so he's got a lot of cloud. He's a very smart guy. And UH, if you want anyone running your central bank when the politicians don't know what to do, it's Mark Arney. And then I think, also you've got Mario drag you at the e c B. So you've got two real pros doing this because obviously the politicians are complete disarray

in the UK. You know, I just want to jump into the bill because politicians in disarray. We get that, But at this point about Mark Arney, aren't you glad to have him there? If you're Boris Johnson, who is a House of Commons Member of Parliament, But as you said, most popular politician right now in London, in in UK for many people. One of our guests said, why would

you want to keep Mark Arney around? Because the opposition, the Breggsit people were saying the Bank of It's skewing its analysis of how hard this would hit the UK economy. They're playing politics, They're trying to affect the vote. They want people to vote to stay. So Boris Johnson's he's political, he's smart. Does he maybe make some noises publicly, but let Mark know, hey, I realize, let's put that behind us. We've gotta keep you k together. Now there's gonna be

a lot of instabilities. He is he smart enough to say maybe his best bet is to make sure that Carney stays at the helm of the Bank of England. I think, Uh, you never want to under a underestimate. Boris Johnson is a very shrewd operator and what he wants now is is confidence to return. He wants stability. That's why he's signed off. Uh. You know that memo of Conservative MPs to keep Cameron in for the moment. So he obviously wants the best person in that job.

Forget about what was said before. What counts now is what happens now and what happens tomorrow. And so he will be a big advocate of doing the right thing because if things go the wrong way, who are they going to blame Boris Johnson? Because there's no doubt in my mind from a trip I took their to UK a couple of months ago talking with my English friends, Uh, is that Boris Johnson, the most popular politician in the UK, made all the difference in the world. Without Boris Johnson,

you wouldn't have had this vote without a doubt. And so it rests very much on his shoulders. And sure he wants to be Prime minister, but he wants to get in there, uh, with an ability to calm the situation and do the right thing. Bill Rhodes, the French Prime Minister Manuel Vows has said that at stake is the breakup, pure and simple, of the European Union. Now is the time to invent another Europe on Gla Merkel today saying that it is a turning point for the

European unification process. What do they mean by that, Well, we're gonna find out pretty soon. I think Volves, who I've gotten to know, is a very common but in person, he's the most competent person they've had in that role for some time. And he's the one who's pushing the

you know, revision of the labor laws. He's the one who convinced Oland, which is what France needs because you saw that they're manufacturing uh dropped and uh their overall uh you know, growth is starting to slow again after a very good first quarter. Uh. I don't think that the leaders of of the Eurozone and the rest of the European Union really know what they want to do at this point in time, and that's something they're going

to have to decide over the coming days. And UH in weeks and as we know, we have elections next year in France and you have elections in Germany. You already having real le penn talking about a referendum. UH. Wilder's in Holland talking about one, and various parties in UH in Italy. So I think the UH, the EU has got to get its act together in the euro Zone. UH has to get its uh it's act together on

how they want to handle it. I think it suits everybody to have a a very positive negotiation out because let's face it, UH, Europe sells a lot to the UK and UH for the UK, everyone is so negative now. But with a weaker pound, manufacturing exports will benefit. Also, tourism into the country will benefit. So I don't think it's all quite the doom and gloom that everybody thinks. It will depend on who becomes prime minister and how they negotiate their way out of this. So I think

that's what's gonna tell the tale going forward. So Boris Johnson isn't a slam dunk to be the next prime minister, UH, not necessarily, He's obviously the favorite, but UH, you know this party, the Conservative Party, has been very Uh, you know, I think ripped apart over this issue, and they're lot of strong feelings and uh, he will have to assuage those who wanted the remain side that he is the

best one to run the country. So I think nothing's for sure at this particular, uh point in time, but I think it suits both parties, Europe and the UK to have a negotiation. Uh that's done in a positive fashion because they both need each other still going forward. This is taking Stock with Pim Fox and Kathleen Hayes on Bloomberg Radio. We continue our conversation now with Bill Rhodes, head of William R. Rhodes Global Advisors. He's a former

vice chair of City Group. He is the author of Banker to the World, Leadership Lessons from the front Lines of Global Finance. Bill's got into the area of restructuring indebted nations back in the eighties when he helped work out the Latin American debt crisis, and his book is all about all the kinds of negotiations he did. Maybe Bill should people should be reading your book as the UK gets ready to deal with the European Union. Well, I'm I'm sure it's going to be quite a negotiation.

And uh. I also uh thinking we uh, we're just talking offline here about the banking situation uh in the UK, in the UK and the EU and the Eurozone. And uh obviously the retail banks in the UK got hit real hard today, you know, Barclay's, Lloyd's, Royal Bank of Scotland. Ah,

because of the concern over what's coming next. But I think one of the things that you're going to see the French starting to push, and this is going to be a problem with Germany, is to finalize the banking union in the Eurozone because as you know, they're there are large parts of that banking union that have never been finalized. And I think given all that's going on the French you're gonna push that very hard. It will

be very interesting to see how that works out. Ah. And we have the Spanish elections on Sunday, and most people have seemed to forget about that, but I think the Spanish elections are going to be very very important also to see what sort of, if any fallout from Brexit you're going to have on those elections, because the polls are showing that ROHOI and the Partido Popolata the Popular Party, the Conservatives would get the vote and the Left would get slightly left less than that, and then

uh you have some medium you know, middle of the road parties. They're getting some and so it's not clear that anyone's going to emerge as a winner. And this issue of Brexit obviously has an impact on Spain because

as we know, Catalunia wants to leave. And in addition to that, people are now talking, as you know about the comments of Premiers Sturgeon up in Scotland saying that it may be necessary, uh, depending on how this negotiation works out with the Eurozone and the UK, to have another referendum on on Scotland to stay or leave, because over I think it was seventy of the votes in Scotland for remaining. That was the strongest area in the UK. And so I think there's so many ramifications here and

uh so I think what's very very important. First of all here is as we talked about, is to make sure you've got enough liquidity in the markets. I think this is where Mark Karney uh will be very good on bringing some confidence back. But second of all, there has to be a process set up as soon as possible about the negotiation arrangement with the UK, and very very importantly, I think the Conservative Party has to decide who the next Prime Minister is going to be. All

of that would bring some sort of confidence back and ability. Otherwise, I think we're in for a rough ride over the next weeks and months visa V volatility, not just in Europe but obviously worldwide. Look what happened here in the US, Look what happened in the Asian markets. And we shouldn't get China because China's got pretty plenty of problems on its own, including this tremendous debt that keeps rising in China, and so I think that you can say the world

is replete with problems. What we need is leadership. I was gonna say civilization and its discontentedness at least right now, as opposed to as discontent. I just want to give you the figures because you mentioned the Royal Bank of Scotland shares down more than eighteen percent today, Standard Charter down two and a half percent, Lloyd's Banking Group down

twenty one, Barkley's down more than seventeen per cent. I want you to turn your attention to an event that is taking place on Monday June, the Brenton Woods Committee. This is the spirit of Breton Woods multilateral leadership in turbulent times. Speak a little bit about why you see this discontent among voters in Spain as you just referenced,

also SISA Party in Greece, Italy's Five Star Movement. Where's this discontent coming from and what's the subject of this Breton Woods Committee meeting and obviously what we're seeing in France and Portugal too. I'll be chairing the meeting, and uh, we're very fortunate to have a Secretary, lou Will, who will be giving his first formal statements on the question of Brexit at this conference first thing in the morning.

Later on, we also have Mike Frohman, who's our trade secretary and this is very very important as to how we're gonna handle this relationship with the UK on the trade side. And uh, we also have the number two persons of the first Deputy Managing Director of the I m F and the meeting will be at the I m F H David Lifton, to talk about all of these issues. So I think it's a very important event coming at this particular time, and obviously the top of

the list is going to be Brexit. Well it's interesting, that's the Breton Woods conference, which was historic in its own way. Um, is this potentially build this, this EU voting, UK voting to leave the EU? Is this potentially some turning point? Are we gonna look back and say, see that's where it started or that's where we realized that the world had gone you know, a d eighty degrees from one point to another. Well, I think this is very representative of the unhappiness you see among the voting

population in the so called Western world. We see it all across Europe, not just in the UK. And uh that's coming out of the Great Recession, the debt crisis, and the Eurozone voters are very very unhappy. And you take a look at this country. Uh, Ernie Sanders who was basically an unknown uh senator uh from Vermont and Donald Trump who two years ago no one would have thought that Donald Trump would be the candidate for the

Republican Party. Let's say a year ago they wouldn't have And this is all also the discontent about you know, where the economy is going. Uh, you know what's going on on inequality, all of these issues I think are replete with in the Western world, and the way ahead here is to get firm leadership is how we're going to work these issues. And frankly, we haven't seen the leadership in the Western world. Well, I guess it's ironic

that Freud wrote Civilization and It's discontents. He wrote it in n I want to thank you very much Bill Rhodes. He is the president and the chief executive of William R. Rhodes Global Advisors. And also just on a personal note, I want to extend to Bill Rhodes our deepest sympathy and condolences on the passing of his dear wife. Bill has been a valuable guest here at Bloomberg and we extend our thanks and we look forward to his continued participation.

Many thanks, Thank you, Bill Rhodes. You're listening to Taking Stock. I'm pim Fox my co host Kathleen Hayes. You're listening to Brexit coverage on Bloomberg Radio.