September 27, 2013 6:47 pm

Alliance Trust’s Karin Forseke on managing the financial crisis

The Swedish businesswoman explains the importance of restoring trust in the world of finance
Karin Forseke, chairman of Alliance Trust, at her apartment in London©Victoria Birkinshaw

Karin Forseke, chairman of Alliance Trust, at her apartment in London

In the weeks following the collapse of Lehman Brothers five years ago, Karin Forseke faced a task more daunting than any of her previous posts, including managing a floor of 4,000 traders and running a Nordic investment bank. As a board member of the UK Financial Services Authority, she was among the first responders to deal with the escalating financial crisis.

“In the UK, we were at the epicentre along with the Treasury and the Bank of England. It was crisis management. And nobody knew where it would end,” says Forseke, now chairman of Alliance Trust, a Scottish-based investment trust.

Her eight-year stint on the FSA, where she became deputy chairman in 2011, coincided with the clean-up operation, and a collective effort to repair another crumbling pillar of the financial services industry: trust.

“It took years to build up that trust and just days to lose it,” says Forseke as she reflects on events over tea in her London apartment. “It was a dangerous time.”

A Swedish native, Forseke, 58, divides her time between Stockholm and London where she bought this one-bedroom flat in 2004 with her husband, Peter Jörgensen, an engineer. “It was the old British Gas building which was converted to flats,” she says, of the open-plan space that has been minimally decorated. “It’s conveniently located. I have the Tube, the buses, Victoria [station] and it’s close to the theatres,” she says.

When in London Forseke enjoys trips to the opera in her spare time, but in Sweden the focus is on gardening. “I have a lovely garden in Sweden that I have designed and built and it’s where I spend a lot of time together with my husband.”

The entrance hall featuring an etching©Victoria Birkinshaw

The entrance hall featuring an etching

Forseke got her foot in the door of the investment world while in Los Angeles. “I moved over as an au pair when I was 19,” she says. “Then I put myself through school and was offered several traineeships.” She settled on Prudential-Bache. “It was a tough school. Very competitive and I had to fight my way through . . . I didn’t wear a dress to work until I was 45,” she laughs, “but I developed a bit of knowledge about derivatives and found a niche.” Forseke was also chosen to give market updates for the west coast television station KWHY. “The ’87 crash came on a Monday and I was on live television.”

In 1986, she met her husband, a technical attaché at the LA consulate, and three years later the couple moved to London to found a derivatives exchange. “The Swedish government had introduced a so-called ‘yuppie tax’, a turnover tax on derivatives, and the futures business dried up overnight,” she says. “OM [The Swedish Futures Exchange] asked us to set up a new futures and options exchange in London. It was the first electronic and foreign-owned exchange. We were outsiders and it was very hard work but a great experience. It’s now owned by Nasdaq,” says Forseke, who was later recruited to pitch in with yet another exchange.

Photo of Liffe traders above desk©Victoria Birkinshaw

Photo of Liffe traders above desk

“I was asked to help integrate the London traded options market with the London International Financial Futures and Options Exchange (Liffe) in 1993.” Forseke started out by overseeing equity markets and rose to become chief operating officer in 1996.

Hanging on the wall in a raised section of the sitting room, where she keeps a window desk, is a framed photograph of a crowd of suited traders jostling for space. “It was taken on our trading floor at Liffe,” she says. “We had 4,000 traders on a floor the size of a football field.”

Did she find the testosterone-fuelled trading floors a challenge? “I came in at senior levels,” she says. “I wasn’t aware of the barriers. I ploughed ahead. I am very focused and just get on with it.”

Even so, she expresses concern about the continuing gender imbalance at senior levels of finance. “Even Sweden has a poor record. Just 5.5 per cent of CEOs in the private sector are women,” she says, opening her laptop to reveal a dismal-looking graph. “It’s a real waste of the talent pool.”

Selection of books on coffee table©Victoria Birkinshaw

Selection of books on coffee table

As chief executive of Carnegie Investment Bank between 2003 and 2006, Forseke was one of the few women at the helm of a publicly listed investment bank. In addition to having a female chairman, Alliance Trust is also run by a woman, Katherine Garrett-Cox, who has been the group’s chief executive since 2008.

“It’s a company that has strong values and really acts the way it talks,” says Forseke. “It’s very important that [women] join the industry, and that they bring their values and beliefs and skills.” So what advice would she offer women considering a career in finance? “Surround yourself with good people. And find the right partner and the right boss . . . You can’t expect to be respected and supported at work when you’re not respected and supported at home.”

Forseke’s reading chair in the lounge©Victoria Birkinshaw

Forseke’s reading chair in the lounge

In the sitting room, the floor-to-ceiling windows offer views over chimney tops and a turbulent sky. While the world marks the fifth anniversary of the Lehman collapse and the debate continues over whom to blame – can Forseke answer criticism that the FSA and fellow regulatory agencies were dozing while the industry lost control?

“It was a different political environment. Before 2008, the pressure was that the FSA was too heavy-handed. Now, of course, the political pressure is to be more heavy-handed,” she says, adding that former FSA chairman Sir Callum McCarthy deserves more credit for trying to raise the alarm: “From the summer of 2007 until he stepped down [in 2008], he was working flat out trying to bring attention to how serious it was.”

She prefers not to call the post-2008 work a clean-up. “The banks had to clean themselves up. But the FSA worked closely with them.” Does she approve of the new decision to divide the FSA into two? “I think the [new] structure is fine for now. I was part of preparing the framework for the split.” A big problem, she says, is that regulatory agencies are still local. “We have a global industry with local regulators.”

Black sculpture by Agneta Gynning©Victoria Birkinshaw

Black sculpture by Agneta Gynning

Over in the kitchen area, outfitted with a slate countertop and sturdy stools, Forseke has added a large mirror to double the view. “I get to see the river through the mirror,” she says, showing me a spot where the choppy waters of the Thames can be glimpsed. On weekends, she often joins guided walks around London. “You see things you don’t see on a normal working day.”

She refills the tea mugs and returns to the subject of trust, badly damaged, she says, following the “once-in-a-lifetime” catastrophic storms. “It was shocking to witness the crumbling down of the industry . . . The consumer has been mis-sold products . . . Yet there are still people in the industry who don’t understand the tremendous damage that has been done,” says Forseke.

So despite the series of ensuing scandals, can the foundations be mended? “It comes back to leadership, values and long-term thinking,” she says, adding a parting thought. “Trust is something we earn. It’s not something we can buy.”

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Favourite thing

Karin Forseke's horse, Luchador©Victoria Birkinshaw

“He’s 10 years old,” Forseke says of her horse. “He’s called Luchador. Do not Google what it means,” she laughs, “I didn’t name him.” She keeps the horse in Sweden and took up dressage four years ago as an antidote to the financial world. “It’s very good to have a place where you can be so focused, attuned to something that belongs in nature.”

Forseke credits a childhood spent gardening with her grandmother for giving her balance. “She was a professional grower of fruits and vegetables. My parents were very young when they had me, worked hard, and I grew up in my grandmother’s greenhouse.”

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