Giulio di Cerbo: A eulogy

06 May, 2015

Giulio di Cerbo was Italian, but not completely. He was raised from the age of four until he turned 18 entirely in England. It endowed him generously with that sense of humour the English prize above all else in a man. But Giulio took special delight in being as Italian as he could. Every day began with a cigarette and a caffe lungo, invariably consumed in the upright position. He regarded milk with coffee at any time after breakfast as deeply uncivilized. Once in the office, each member of staff was greeted with Italian extravagance. Any disagreement with a colleague - and especially with his close friend and fellow Italian Citibanker, Achille d'Antoni - was accompanied by a theatrical degree of gesticulation. Appearances were, if anything, even more important than body language. Giulio took enormous pride in an immaculate turn-out, never wasted an opportunity to deplore British and American indifference to attire, and made no secret of his dismay at the introduction of dress-down days. Alcohol was never consumed without food. His principal investments were in Italian real estate, including a ruined house overlooking the sea which he bought and renovated near Alghero in Sardinia, where summers were spent. Every house was filled with antiques, for Giulio was ever-mindful of his surroundings. In fact, he could not pass a bric-a-brac shop or a car boot sale without stopping to buy something. An art deco armchair, acquired in a New York antique shop, was lovingly disassembled in a hotel room and packed in a suitcase for the passage to Alghero. In fact, most of the pieces found their way to Sardinia eventually. Giulio married a Sardinian, and they raised two daughters together, Karen and Luisa. Karen blessed him with grand-children, Dylan and Timothy. He was immensely proud of them all, because his family mattered. Nothing distressed him more deeply than the eventual breakdown of his marriage.

His determination to live in London played some part in that unhappy outcome. Giulio lived in Milan as well as London from the early 1990s – the grandchildren were an unfailing temptation to return - but he was a natural metropolitan, and loved to spend time at the heart of the most important international financial centre in the world. It was there that he spent most of the dozen years he enjoyed with Lesley, who he met aboard a transatlantic flight in 2001, and whose zest for life more than matched his own. “We started talking,” as Lesley describes that first encounter. “We never stopped.” She introduced him to many pursuits that he would not otherwise have attempted – notably riding – because, as Giulio liked to say, “work is my hobby.”  Certainly it was not for its theatre or music or literature that Giulio loved London. The sustained concentration the arts required was quite alien to his restless and inquiring mind. Giulio really loved London because it was constantly alive with commercial possibilities. "He was a real can-do person," says a former colleague. "He simply could not sit still. His idea of writing something up was to actually go and do it." Lesley reports that he was exactly the same at home. “He had many ideas – some of which did sound suspiciously like work,” she says. He planned a golf course, and a consortium of Sardinian olive oil producers. He did produce his own olive oil, and experimented with manufacturing unusual foods, drinks and perfumes from the wild plants and trees that grew on his Sardinian estate. “If he set his mind to something, you could be sure he would find a way to make it happen,” says Lesley. “And he shared his vision and skill unstintingly, not only in his business life, but also at home. He was always interested in other people and what they did, and never failed to suggest how they could make themselves richer or happier. He just could not resist speaking up.”

Speech was, however, reserved mainly for the afternoon. Giulio was un-Italian enough to insist on arriving in the office early, but Italian enough not to hide his dismay at people who tried to speak to him before lunch. “He was not a morning person," recalls a former colleague. "He was beginning to be approachable round about lunch time. If you wanted to speak to him seriously about something, the early evening was the time to do it." In fact, he was un-American enough regularly to be found in the office at 9.30 or 10.00 p.m. on a week-day, and on at least one of the days of the weekend, brooding on and breeding ideas to pursue on Monday morning. For a workaholic, London functioned better than Milan or Rome, the cities he knew best in Italy. It was also open to the talented and the energetic, which were the sort of people Giulio preferred as colleagues. By the time he came to work there permanently, the City had quite dispensed with the nepotism which continues to constrain the Italian economy. Even the aeroplanes left on time more often than not, unlike their Italian equivalents, whose indifference to punctuality ever failed to exasperate him.

But there were three aspects of life in London that Giulio did not enjoy. One was the weather (Lesley recalls that he “always said London would be the best city in the world if it were not for the weather”). Another was speed bumps. But the most vexing of all was the challenge of getting to work. Citi was one of the first banks to move from the City to Docklands, uprooting Giulio from its Cotton Centre offices at London Bridge to Canada Square at Canary Wharf, which in the mid-1990s lacked anywhere to eat, drink or shop. Giulio disliked it so much that he petitioned Ray Parodi, then global head of direct custody and clearing at Citi, to move him back to the Cotton Centre. Parodi confesses the nagging was so insistent that he almost gave in. It is a small but apt measure of the high esteem in which Giulio was held by the man who plucked him out of the Milan office to run the direct custody and clearing operations of Citi throughout Europe. Giulio liked to joke that the entire direct clearing and custody franchise of Citi around the world today could be traced to a call he took from the Salomon Brothers relationship manager in New York, asking whether the Milan branch offered custody services. It did not, but Giulio explained that, if Salomon Brothers wanted the service, he would arrange it for them. The story says as much about his humour and his humility as it does about his much about his can-do attitude, for the anecdote under-states what he really achieved.

The European settlement crisis of the late 1980s, caused by the inability of custodian banks to process the sheer volume of transactions that occurred in the period immediately prior to the crash of October 1987, threatened fund managers and investment banks with serious losses. After all, it led directly to the Group of Thirty (G30) report of 1989, whose nine recommendations are the foundation document of the modern securities services industry. As head of the Milan business, Giulio proved ingenious in retaining the inbound business of the bank by finding ways around the obstacles to clearing the settlement backlog. Eventually, the domestic banks having lost control of international business, the Italian market evolved into a duopoly, of which Citi was one half and J.P. Morgan the other. The management of neither was enthusiastic about a success that owed as much to the incompetence of the domestic banks as to their own enthusiasm to replace them. In 1995, J.P. Morgan elected to exit, selling its European sub-custody and clearing network to Paribas. It is often forgotten that Citi had a similar if brief period of indecision over whether it wanted to be in the business or not. At one stage, French clients were encouraged to move their business to Paribas and Milan was threatened with closure.

The rapid and sustained reversal of that indecision owed a great deal to the success of Giulio in attracting broker-dealers as clients in Italy. It was that achievement which persuaded Ray Parodi - for whom Giulio was until then no more than a voice on the telephone - to give him the opportunity to repeat the feat on a Europe-wide scale. He moved to London to take up the new role in 1990, wisely bringing with him his product manager, Jürgen Zeuss, who had overseen the development of the system that rescued the Milan operation from the settlement crisis. The pair were so successful in London that Giulio was eventually given responsibility for running sales and relationship management for direct custody and clearing globally. He was lucky, in the sense that brokers relished the vast and liquid Italian government bond market, but he also showered them with services they did not know they wanted until they had them, including integrated tri-party financing and operational support for their (pre-direct market access and pre-euro) trading entities in each European jurisdiction. His advocacy of the value of broker-dealers as the foundation of a European client base was a personal victory. It proves, contrary to his reputation in some quarters, that he was not always heedless of the strategic momentum of the organization he worked for. At the time, the senior management of Citi in both London and New York was more excited about building a global custody business with institutional investors.

That competition for resources with global custodial colleagues, let alone rival agent bank networks, continued to spur Giulio on until he finally left the bank in 2008. It is a tribute to his persistence and his success in building revenues that direct custody and clearing was never subordinate to the demands of either global custody or prime brokerage. Since he led the expansion of the Citi direct custody and clearing network into Asia, Latin America, and eventually central and eastern Europe as well, Giulio can take much of the credit for building the 62-market direct custody and clearing network that Citi owns today. He expanded the asset classes it serviced as well as its geographical reach, inviting Alan Cameron to bring to direct custody and clearing the equity brokerage network he had built for Citi in the American Depositary Receipt (ADR) market. It complemented perfectly the sell-side network Giulio himself had created on the fixed income side. It was the doubled strength of those relationships with the broker-dealers that put Citi in the perfect position to exploit the direct market access (DMA) trading opportunities created by the single European marketplace and (eventually) the single European currency from the mid-1990s onwards. "The volumes all came from the big broker-dealers that looked after the asset management community," recalls a former colleague.

Giulio understood the impact of the capital savings of centralized trading as readily as he had understood the need to support the local trading vehicles of the broker-dealers in the previous era. That understanding was the return on the time Giulio invested in talking to broker-dealers in Europe. He knew their tastes well enough to host the annual client party not at the Savoy – the London equivalent of the Crystal Room at the Tavern on the Green, where Ray Parodi entertained New York brokers at Christmas time – but in a noisy, low-ceilinged, smoke-filled den in the City. Giulio also knew when to step back. As heads of operations at broker-dealing firms became more professional, he abandoned his highly personalized, face-to-face approach, and came to rely instead on a combination of business analysts to map out the opportunities and salesmen to seize them. It was this combination that enabled him to detect what others could not: that neither DMA nor netting through central counterparty clearing houses (CCPs), both of which grew rapidly in the Noughties, were threats to the Citi clearing business in Europe. On the contrary, Giulio saw that they were opportunities. By understanding the value to broker-dealers of the capital economies they afforded, Giulio rightly predicted that CCPs were more likely to lead to an increase in traded volumes than a decrease. His decision that Citi become a general clearing member at every CCP which mattered was triumphantly vindicated when settlement volumes climbed in the wake of a surge in trading.

"During those times when a number of us were looking gloomily at the business and saying, 'This is a great threat,' Giulio saw it as a great opportunity, and grasped it with tremendous enthusiasm," recalls a colleague. "People picked up on his enthusiasm, and executed a set of products to support clearing which worked very well." By then, of course, Giulio had picked up on the next fundamental shift in the marketplace: the rising importance of market infrastructure in determining where broker-dealers would choose to execute trades. As early as 2000, he was analyzing the electronic crossing networks (ECNs) that were the precursors to the plethora of trading platforms, dark pools and multi-lateral trading facilities (MTFs) that characterized the high frequency and algorithmic trading era in the wake of the Markets in Financial Instruments Directive (MiFID) and Regulation National Market System (Reg NMS), both of 2007. It was obvious to him that CCPs were the key to the success of any electronic trading platform, since they eliminated counterparty credit risk. In April 2007, even before MiFID had come into effect, Citi joined forces with EuroCCP to provide clearing and settlement services to Turquoise, the MTF created by nine major investment banks in direct response to MiFID.

The Turquoise deal was a classic instance of an insight or idea first pondered by Giulio becoming concrete reality. "He changed our view of infrastructures from being something we used, or which were a threat, to something we could actually help to grow," recalls a colleague. "The idea of the direct custody and clearing network providing inter-connectivity between infrastructures was very much his idea." It was scarcely surprising, when he finally left Citi in 2008, that Giulio chose to work with and inside market infrastructures. He first advised Depozitarul Central, the Romanian CSD - his command of Italian made this relatively easy to do – before in 2011 becoming a senior adviser to the London Stock Exchange, which had acquired  Borsa Italiana in 2007. Simultaneously, he was appointed chairman of both the Italian CCP (Cassa di Compensazione & Garanzia, or CC&G) and the Italian CSD (Monte Titoli). Nobody who knows Giulio was surprised to learn that both Monte Titoli and Depozitarul would be in the first wave of CSDs to join TARGET2-Securities, the single European settlement system created by the European Central Bank, in June this year. Giulio believed passionately in the importance of T2S.

It would be easy to attribute his neophilia to a low boredom threshold. In fact, his ability to exploit secular trends owed more to his trust in the wisdom of the naïve. Nobody would describe Giulio as a predictable manager, but he had a marvellous knack of attracting youthful talent, and the skill to motivate it. There is nothing remotely surprising about the fact that one of his protégés (Reto Faber) now holds the job Giulio once had as head of direct custody and clearing in Europe or that another (Tom Isaac) is now European head of financial institutions within the corporate and investment bank. When they were starting out, he would listen to them, and he remained open to the ideas of younger colleagues until the very end of his career at Citi. That succession of young protégés proved the ideal foil for his constant stream of ideas, since they were more open to his preference for discussing them at a time of day when people with families preferred to go home. “He was a workaholic,” says one former colleague. “When we attempted to call it a day around 7.30 p.m., Giulio would say, `Working a half day?’  And we would quickly go back to our desks and pretend to work more. But he truly challenged us and inspired us to be creative.”

Another recalls that he used younger colleagues quite deliberately to undermine the natural caution of the experienced. "He would be discussing an issue all day with one of the senior management team and then, at 7.30 p.m., call in the younger people and ask them, 'Where is the opportunity? How does this work?'," he says. "He would be getting naive ideas from someone who had no experience, but he would play with their naive ideas, and then play them back to more experienced people, as an invitation to them to pick them up and seize the opportunity. Then he would get the sales guys to go and talk to the clients about it, and they did." His modus operandi was akin to an unstructured seminar, in which the opinions of the most inexperienced appeared to count for as much as those of the most experienced. Everybody who worked for him when he ran direct custody and clearing at Citi in the 1990s is agreed that it was the most enjoyable period of their careers. "He was a great listener," says one. "He would challenge you, but also listen to feedback. Most people get an idea, and they cling to it. Giulio was quite happy throwing away ideas. He would always adapt, so people were ready to share stuff with him."

This openness allowed him to be demanding of people without being disagreeable. It certainly militated against groupthink, encouraging a constant questioning of the status quo. “He found solutions," says a former colleague. "The key to his life was finding new and better ways to do just about everything. Sometimes he was right, and sometimes he was wrong, but that is the way he was." Nothing exemplifies this restless search for new solutions than his enthusiastic endorsement of an idea floated by the Citi branch in Manila. The management of Citi Manila had identified exiled Filipinos and Filipinas remitting their Italian earnings to their families in the Philippines as natural buyers of a new Citi payments service called Citifast. To contact them, the senior country head proposed that Rowena Romulo move to Milan. When she got there, Giulio worked with typical energy and enthusiasm to help Rowena make contact with potential clients, not only via church services, weddings, parties, public parks and basketball games, but by selling door-to-door on Thursdays and Sundays, when potential targets were off work. Although Rowena had come to Milan precisely because she could speak the language, it did not deter Giulio from coming along occasionally and making a pitch of his own in both English and Italian.

This natural enthusiasm was the secret of the magnetism of Giulio di Cerbo. Even his superiors succumbed to it occasionally, finding themselves agreeing to his expansion plans, despite the absence of concrete evidence to support them. Even within a global bank that prizes cultural diversity, Giulio commanded through his personality alone an astonishing degree of latitude. Inevitably, the unpredictable nature of the planning, and the random nature of the outcomes, led to managerial clashes, especially between the generations. Junior staff would follow a lead from Giulio that more experienced colleagues knew was unrealistic. His fecundity could exasperate even his most ardent followers, and especially those who prefer to implement the first idea before moving on to the next. "He was more of a starter than a finisher," recalls one. Another likens him to a puppy, who was forever dropping one ball to chase after another. "It was immensely stimulating, and immensely frustrating, all at the same time," he says.

Of course such an open-ended approach incurs risks. Chief among them is the risk of subordinating long term strategy to passing enthusiasms. But the sheer scale and solidity of the direct custody and clearing franchise of Citi today refutes any suggestion that the risk ever came to pass. It is in fact a case, rare in business, of si monumentum requiris, circumspice. Of course, Giulio did not build that monument to himself alone. But the fact that the deputies Giulio nurtured, and relied on to select and implement the propositions that were viable, are now conspicuous among the leaders of the direct custody and clearing industry, is an even finer testimonial to the man. They include not just Reto Faber and Tom Isaac, but Alan Cameron (now at BNP Paribas) and Rowena Romulo (now at J.P. Morgan). Many other graduates of the Citi of the turn of the century have named Giulio as their mentor. "There were days when he was absolutely maddening as a boss," says one of them now. "But there was no one more loyal as a boss, either." Loyalty had its downside - resignations to join competitors were treated as a form of personal betrayal - but Giulio never failed to live up to the demands he made of others. He retained his long-vested shares in Citi, the bank where he spent 28 years of his life, even as the gathering financial crisis took that great institution to the edge of the abyss. A lesser man would never have made that mistake. But then lesser men never make anything at all.


Dominic Hobson