Surveillance. I am Francine Lacqua. Tom, i know you were in new york and it is going to be a great day. Bank newsthe deutsche , it gets your attention. I would focus as well on the italian banks. It is benny the headlines, but watching unicredit beneath the headlines but watching unicredit. Francine especially if the nonperforming loans keep putting an damper a damper on the italian stocks and the european stocks. Nejra we start with some news breaking in just the past two minutes in turkey, markets are giving a vote of confidence to the latest move by the Prime Minister elect. He has decided to keep the last man standing of a market Friendly Team credited with turkeys economic boom. It is a boost for british Prime MinisterDavid Cameron and his campaign to stay in the european union. Older voters are switching to his side according to the or be survey. 55 plan tors over vote to stay in eu, up from 34 in march. The referendum is june 23. Euro area finance mise ministers meet to discuss the next step on greek debt relief. Will alsonisters debate the largest problem, how to restructure 360 billion of debt by postponing payments and lowering prices. Greece has started to gradually evacuate their largest refugee camp that sprung up on the border with macedonia. It held or than 8000 people. Macedonia macedonia is not letting any more refugees cross. Chuing analyst charlene warning of the risk from chinas credit inch. She says china needs a bailout in the 20 in the trillions of dollars. She was a partner at Autonomous Research and warns the biggest immediate threat is the offBalance Sheets of Wealth Management products. Global news 24 hours day powered by 2400 journalists in more than 150 news bureaus throughout the world. Churn, yields migrate higher with the curve flattening higher, eurodollar, weaker with u. S. Dollar strength 1. 118. Handle,ude with a 47 and gold 8. Francine in terms of the european equities, they are gaining a touch. The asian stocks are falling. They are closed to the lowest level in at least seven weeks. Exporters in japan being weighed down by this mounting talk about a fed rate rise. You can see brent a similar picture to what you see in wti. Lorenzoased to welcome bini smaghi. Insight ofe know the Monetary Policy like this man. When you look around the world, there is risks. Monetary policy is doing its best to counter the risks. Are we expecting too much from Central Banks . Lorenzo it is not the right question in the sense that they are doing their job. It would be much better if other policies were going in the same direction in terms of fiscal support, in terms of structural reforms, but they are not. The ecb cannot ask itself, i am doing too much. That is my clearly defined objectives. Francine why is the private sector and politicians not doing enough, is that the right question . Lorenzo if you look around the world, there are elections next year in france and germany, in the u. S. , very close. Out may have an easy way for low Interest Rates generated by the ecb or the fed or others that may say, why do we need to do the political effort . Why do we need to invest in Political Capital at the time when the Central Banks are taking care . That does not mean the ecb or any other central bank should raise Interest Rates to push the other politicians to the task. I think they should find their own way to push their government to be more proactive. Francine we are in brussels to talk about financial services. What needs to happen for investors to rewrite european banks . How do you change the psyche . Lorenzo i think the main thing is that we have final end of the regulatory process. We need to know when it stops. The uncertainty about what is , and this creates uncertainty about capital, about risk rates. I think regulators now need to say, this is it. Now we give time for the bankers for that and to start optimizing their business model. Stop to the uncertainty. I think investors would realize the Banking System has changed over the last years. It is safer, they can come back to it. They can see the return of capital when capital is needed and can be generated. This requires less uncertainty. At when i look at your work your phd in chicago i would suggest negative Interest Rates were not in the textbook. It is something new you weaker dealing with. Can eu bankers correct their challenged banking Business Plans in a mail you of negative eu ofest rates a milli negative Interest Rates . Lorenzo it is not easy because you have negative Interest Rates in an environment of low growth so margins are coming down. We have in front of us clients which are in a much better position so the cost of risk is also coming down. The solidity of the Banking System is improved. These lower margins cannot last forever and ever. You need to regain profits margin somewhere else so you need to think about crossselling different products , they be looking more at fees rather than margins. It requires some innovation on behalf of the bankers and also looking at the optimal composition between Retail Business and Investment Banking. A basic cardinal role is currency depreciation and another is to simply go out and raise more cash. I do not want to ask about Societe Generale where your were but do you have a confidence that eu banks could raise new capital if they had to . I think you can raise new capital today if you have a good story to sell to investors. If you have a good project, a good vision about the Business Plan you have in front of you. You are askingnk to invest in, how is it going to generate income . That is the key challenge for. Ny manager that has to go out he has to have a vision and he has to be convincing that the interventions he will make in the bank wont be able to make a turnaround will be able to make a turnaround. Francine what will be the domino effect of a possible brexit . Lorenzo for our own bank, i think we are quite hedged. There can be domino effects within the u. K. And within europe. One of the problems is the fashion of referenda. Politicians tend to follow each others mistakes and the idea that you want to give the last word to the people is very fashionable to adjust populace. Referendums are never a good answer. You are not always answering to. He question i see that the polls now are suggesting the british people are focusing on the right question. Uncertainty versus certainty. Francine for the italian Banking System, what is your take on what will happen . Will he see a more positive effect . Lorenzo there are two issues, capital and ntl. Detachedssues are not from each other. The italian together with the german Banking System is to pragmatic. We need concentration and that is the only way to start regaining some market power, and to be able to diversify products and so on. That is a process which is slow, it is too slow. We need to accelerate this. Francine thank you so much for joining us today on surveillance. That was the Societe Generale chairman. Coming up on the program in anut 20 minutes, we have exclusive interview with jes staley, the barclays ceo. He is downsizing the bank and i will be asking him what that means for his restructuring plans, hiring freeze, and how he sees the european banking landscape. Tom good morning, everyone. Francine lacqua in brussels. She will have an important interview with jes staley of barclays coming up. A busy banking morning across the european union. Taken by the moodys downgraded of Deutsche Bank. With that, lets get to our Bloomberg Business flash. Moodys has cut Deutsche Banks credit rating. The unsecured debt rating was lowered to two levels above junk. Says Deutsche Bank faces mounting challenges in carrying out at turnaround. John cryan says the bank is very disappointed by the cut and the bank could easily repay its debt many times over. Hackers may have targeted more banks than were previously reported according to the ceo of swift. Hackers exploited weaknesses and how banks connect to swift to still 81 million from the bangladesh centralbank. They are boosting security members measures. Costs toeing hurt by prepare repair a chip factory damaged by an earthquake and they are facing a drop in demand for smartphone components. That is the Bloomberg Business flash. Tom madura, thank you so much nejra, thank you so much. We need to bring in simon theedy, who has darkened doors for the intrigue that the governor faces, particularly given the referendum, eu referendum. Does it color and shade everything now . Simon pretty much. Mark carney is likely to find that again today. They are more likely to quiz him on brexit and the banks role. Tom what you have done for years is linked in financial and banks into our broader economics. Fold in the eu banking tension and what the british banks are facing as well into a Slower Economy and the austerity that is out there, link the two together when we see a Deutsche Bank ground downgrade but see government Governor Carney speaking about some optimism. U. K. Andnks in the obviously in the may 9 of europe remain under pressure from their shareholders, regulators, and those in the u. K. Are having to think about brexit. Hsbc is pretty much alone saying it would move on thousand people to paris straightaway on a vote to leave the eu. Other banks talking about it in quite vague terms. They are pulling back on research and the like so the banks probably are trying to look through it but at the same time know what they would have a huge manifestation in how they do their business. Tom what are the pressures on Governor Carney now . I understand the whole thing is to maintain control. The to do list for Governor Carney in the next four weeks . Simon to do nothing. He and the bank will probably be quite grateful, they are not allowed to speak about brexit and they will go very quiet. When ibout a month or so have, under a great deal of pressure, some lawmakers calling on mark carney to be fired for getting too involved in the Brexit Debate and providing too much analysis of what it could mean when he talks about the risks of recession. His point is he is just assessing the outlook and that white that is what he has to set Monetary Policy against. Analyzing the risks to the economy. Tom Simon Kennedy, our chief economic correspondent from london. Francine lacqua is in brussels with her important and timely interview with jes staley of barclays. In our next hour on bloomberg onrveillance, Richard Haass the International Relations of his council on Foreign Relations, and on our domestic politics. From brussels, from new york, surveillance. Francine welcome back to surveillance. We travel the world to bring you the best interviews. Francine lacqua in brussels, tom keene in new york. James an interview with gorman of Morgan Stanley and we spoke with him about business. He believes his business is doing better. James the returns were modest, they were not where we want, but i was not troubled. On this,as on my own but i felt pretty good about the First Quarter because this was a very challenging environment and we produced a 6 . Stay tuned. Gorman, like many bankers saying this is a tough environment and he is feeling good about trading in the First Quarter. Lets get to Michael Moore who follows the u. K. Banks. When you look around the world, there are so many risks and that means risk to trading and Capital Markets. Michael it does, and it does not seem like that is going away. You had some analysts come out and say the Second Quarter is likely to be down again after we saw significant drops in Investment Banking revenue in the First Quarter. While gorman sees upside once things get better, the question is when is that going to happen . I just mentioned this, i refuse to believe that things are normal in a millieu of negative Interest Rates. What are you seeing in terms of the development of the corner in returning reporting of revenues and earnings that is affected by negative rates . Michael you are certainly seeing that on the retail side in europe. Some banks have started to move to try to address that, to pass that along to customers but there is not a ton of room there. Have some competitors and when people think that this is a temporary thing, they are willing to take on some pain to kind of keep those customers and not risk driving them out. I guess it comes down to each individual companys view on how long the situation can last. . Om what is the immediacy here what is the level of desperation . Andand i know in september october they are planning for the next year. What are they planning for now . They are planning for the desk are they planning the fourth of july or labor day . What is the urgency . Banksl a lot of the big in europe have somewhat written this year off. So many of them are in a restructuring year have kind of take a lote going to of pain this year so a little more pain perhaps is not the worst thing for this year and it sets them up better for 2017. I think they have a shortterm view in terms of taking some pain, doing some of the dirty work in terms of restructuring, cutting jobs with a view of 2017 being a little bit cleaner and helping the economy helps with that. Tom what are we going to see out of unicredit . A changing of the guard . Michael not quite clear. They have not been too clear on that so i guess we will see. Tom that is a fair answer. Michael moore, thrilled he is leaving our coverage in london. Francine lacqua is in brussels with the chief executive officer of barclays, jes staley trying to pick up the pieces and move forward into 2017. Next. Okay, ready . Whoa [ explosion ] nothing should get in the way of the things you love. Get americas fastest internet. Only from xfinity. Francine welcome back. I am Francine Lacqua in brussels, tom keene in new york. The reason i am in brussels is for one man and one man only, jes staley of barclays. Winky so much for giving us the time thank you so much for giving us the time to catch up on you. You have been in the job for six months. How is it going . Jes our core franchise of being a transatlantic consumer Corporate Investment bank did quite well in the First Quarter. Our return on tangible equity and now wele digits, have the exercise during 2017 of closing our noncore businesses. We have closed or assigned sale eements for every banking we have a signed Sale Agreement over our asian wealth business. A signed agreement to sell our is this to bloomberg and we need to execute it in the course of this year, and i think we feel good. The hiring freeze, we are reducing our headcount. We are down about 10,600 people and have made significant progress in a major strategic move with respect to africa. Francine will there be any more downsizing . The perimeter of what barclays will be is set. We set that on march 1 and that is immutable. Things outside of barclays perimeter we need to work on. We will always be making ourselves more efficient at the core franchise, we want to ride into the future with it. Francine they are looking at getting a big stake in Barclays Africa. The Large Pension Fund for the state of south africa i think it is great for them and we look forward to their working with us as we move from a controlled position in Barclays Africa to a noncontrolled position. Thisine by the end of year or will it take a little bit longer . Once the capital gets unlocked, what do do with it . Jes we gave ourselves to 23 years to do it but we were enthused two to three years to do it. A lot of institutional interest in the u. S. , europe, and south africa, so we are encouraged. We will make sure we have time to do this in an effective way for our shareholders and the shareholders of Barclays Africa. Francine what do you reinvest in . Analysts haveof picked up on this, we have the ability to ray managed our balance sheet. Because we haves been so because we have been so constrained with capital we have not been able to do that. Essentially, redeploying the capital to end up in a very a better position in terms of earnings per share. We do have opportunities to deploy the capital. It gives us more flexibility as we go forward. Francine how tough is it being a european banker in this environment jes . Jes the financial crisis created economic calamity globally, and the banks did a fair amount to lead to that economic calamity so we have a lot to do. We have got to work on conduct issues, the value propositions. The Bank Balan