2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

TheNeverEndingStory:Europes
BanksFaceaFrighteningFuture
February16,2016

EdwardRobinson

IfyouhadtopickthemomentwhenEuropeanbankingreachedthepointofno
return,whichwouldyouchoose?TheJulydayin2012whenBobDiamond
resignedasBarclaysschiefexecutiveofficeramidtheLiborriggingscandal?
OrthefallmorninglaterthatyearwhenUBSannounceditwaspullingoutof
fixedincomeandfiring10,000employees?HowaboutSept.12,2010,when
BaselIIIsraftofcostlycapitalrequirementsstartedupendingtheeconomicsof
globalfinance?
Allsignatureevents,tobesure.ButtryMay21,2015.ThatswhenDeutsche
BankstockholdersfiledintothedomeshapedFesthallearenainFrankfurtto
takepartinoneofthemostveneratedand,letsbehonest,boringritualsin
corporatelife:castingavoteonmanagementsstrategyandperformance.It
wasntdullthistime.Almost40percentofthebanksinvestorsgavecoCEOs
AnshuJainandJrgenFitschenabigthumbsdown.Whilewinningsixoutof10
votesisalandslideinpolitics,itsacrushingblowatapubliclytradedcompany.
http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

1/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

BytheendofJune,JainwasoutandFitschenhadagreedtoleavethecompany
byMayofthisyear.

IllustrationbyDavidFoldvari

InvestorsarerunningoutofpatiencewithEuropeanbankchieftains,andno
wonder.SincethefallofLehmanBrothersinSeptember2008,eightofEuropes
biggestbankshaveannouncedlayoffsaddinguptoabout100,000employees,
paid$63billioninlegalpenalties,andlost$420billioninmarketvalue.In
2015,DeutscheBanklostarecord6.8billion($7.6billion).InmidFebruary
theindustrysufferedanepicselloffassubzerointerestrates,Chinasslowdown,
theoilcrash,andloomingregulatoryandlitigationcoststriggeredanoutbreak
offearnotseensincethefallof2008.JustlastyearnewCEOstookoverat
Barclays,CreditSuisse,DeutscheBank,andStandardChartered.Nowtheyhave
tofindawaytoprosperinamarketplacethatsbeingreshapedsimultaneously
bystrictnewcapitalregulationsandmyriadfinancialtechnologystartupsthat
donthavetoabidebythem.

WhileAmericanbanksappeartohaveturnedthecornersincethatgutchurning
autumnnearlyeightyearsago,Europeaninstitutionsaregirdingyetagainfor
http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

2/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

anotherroundofrestructuring.SomuchsothatanalystsinLondoncallthem
buildingsites,BloombergMarketsmagazinereportsinitsforthcoming
issue.CreditSuissesnewCEO,TidjaneThiam,isrightsizingtheinvestment
bankandpushingfora61percentjumpinpretaxincomefromhisinternational
wealthmanagementunitoverthenexttwoyears.AtBarclays,JesStaleywasted
notimecutting1,200investmentbankingjobsandclosingofficesinAsiaand
AustraliaaftertakingchargeinDecember.Meanwhile,JohnCryan,theBritish
executivewhoreplacedtheIndiabornJain,ispursuinganunprecedented
overhaulofDeutscheBanksentireinformationtechnologyinfrastructureto
shoreupshakyriskmanagementsystems.
NoeventcrystallizestheforcesatworkinEuropeanfinancemorethanJains
exitandCryansentry.Jain,53,afixedincomemaestrowhoexcelledonthe
tradingfloorandthesalesside,didasmuchasanyonetobuildDeutscheintoan
investmentbankingpowerhousewithoperationsin70countries.Nosurprise,
then,thatwhenitcametimeforhimtodraftafiveyearplantoconfrontthe
forcesbuffetingtheinstitution,hebalkedatafundamentalreorganizationalong
thelines,say,ofwhatSergioErmottididatUBSin2012.InApril2015,Jain
andFitschenvowedtodivestDeutschessharesintheGermanretaillender
Postbankandretreatfrommorethanahalfdozencountriesaspartofa3.5
billioncostcuttingplan.Evenso,asJainputit,DeutscheBankwouldremain
globalremainuniversal.HesaidinaBloombergTVinterviewatthetime,
Therewasquiteabitofspeculationthatwemighthavedonesomethingeven
grander,evenmoreradical.Itreallybecameacaseofnotalteringthecore
DNA.
Thatwasntwhatinvestorswantedtohear,andDeutschesharesskiddedalmost
10percentoverthenextweek.Analystsgripedaboutthebankssoaring
litigationcosts.Thatmonth,Deutscheagreedtopay$2.5billioninpenaltiesto
U.S.andU.K.authoritiesforitsroleintheLiborraterigging.(Nocurrentor
formermemberofthebanksmanagementboardwasimplicated.)But
somethingdeeperwasatwork,too.Europeanbanksarentgoingthrougha
http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

3/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

stormyphasethatwilleventuallyclearandpermitthemtoclaimanewgolden
age.Theindustryisundergoingametamorphosisthatwilldemandathorough
andradicalalterationofitscoreoperatingmodel.

Zurich
Photographer:MarkHenley/PanosPictures

Sincethelate90s,lendersonbothsidesoftheAtlantichavesoughtstrength
throughconsolidation.Theybecamefinancialsupermarkets,crossselling
productsandservicestoasmanyclientsastheycouldreach.Theirswasabelief
systembuiltonthepromiseofefficiencyandgrowthintheend,theregime
failedtodelivereitherinasustainableway.NowuniversalbanksinEuropeare
unbundling.Toplaythegame,abankhadtobeintegrated,saysClayton
Christensen,aHarvardBusinessSchoolprofessorwhowrotealandmark1997
treatiseonindustrialscaledisruption,TheInnovatorsDilemma.Whats
happeningintheirworldisthatitsbecomingmoremodular.Moreservicescan
beprovidedbyindependents.Littlebylittle,customerswillmoveawayfromthe
oldandintothenew.

http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

4/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

ButthebankingindustryisbecomingmorefebrileasCryan,Thiam,andtheir
peersstruggletoreengineertheirfirmsinthefaceofanunforgivingmarketand
astalledEuropeaneconomy.OnFeb.8,DeutscheBanksharesnosedived
almost10percentandthepriceofcreditdefaultswapsbackstoppingitsdebt
soaredtoitshighestlevelsince2011,accordingtodatacompiledbyBloomberg.
Thecause?AwarningfromcreditanalystsinLondontoclientsthatDeutsche
maybeunabletoservicesomeofitsriskiestbondsnextyear.Cryanwastedno
timeintellingthemarketplacethatthebankwasrocksolidandwouldnot
missbondpayments.Still,itwasanominousflashbacktothemonthsleadingup
tothe2008crashwhenonebankbossafteranotherassuredinvestorsthattheir
firmswerentslidingintoacapitalcrunch.
Atthesametime,peertopeerlending,mobilebanking,andtheadventofthe
blockchain,thesoftwarepoweringbitcoin,aremountingachallengetobanks
simplifyingfinancebymakingiteasiertomanagemoneyandsendpayments
overseas.Banksareracingtocatchupbyestablishingacceleratorstoincubate
startups,sometimesjoiningforcestopoolexpertise,andevenpatentingtheir
owndigitalcurrencies.Morethan100startupsarenowattackingthecore
servicesofretailbankingintheU.S.andU.K.,accordingtoCBInsights,aNew
Yorkresearchfirm.Theintimacyanddistributedpowerofasmartphoneinthe
handsofapersonissodifferentthananythingwevefacedinourbusiness
careers,BrianMoynihan,CEOofBankofAmerica,musedduringaroundtable
discussionattheWorldEconomicForuminDavosinJanuary.

Forallthechangesimposedbypolicymakers,itsthepropellerheadsinLondon,
NewYork,andSiliconValleywhomaytrulyrewirethebusinessofbanking.
http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

5/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

Venturecapitalists,angelinvestors,andbankersthemselveshaveplowedmore
than$24billionintofintechstartupsworldwideinthelasttwoyears,according
toInnovateFinance,aLondonbasedtradegroup.Theresafundamental
changetakingplaceinbanks,saysSamHocking,whowasoncecoheadof
globalsalesatBNPParibassprimebrokerageunit.Theyseetheunbelievable
costsintheirtechnology,andiftherearewaystobringthemdownbyworking
withoutsidefirms,thatsgottobemeaningful.HockingnowrunsAltX,aSan
Franciscobasedstartupthatproducesportfolioanalyticsforhedgefund
managersandinvestors.
Theresnobetterplacetogetafeelforthefintechmomentthanthe39thfloorof
OneCanadaSquare,apyramidtoppedtowerintheheartoftheCanaryWharf
complexinLondonsEastEnd.Threeyearsago,ClaireCockertonandEricVan
derKleij,entrepreneurswhospecializeindevelopingstartups,setouttobuild
Level39,thebiggestacceleratorforthisnewbreedofstartupsinEurope.Its
ownedbyCanaryWharfGroup,thepropertydeveloperthatslongbeenthe
Londonlandlordfortheworldsbiggestbanks.Havingbeenwhipsawedinthe
crash,CanaryWharfconcludeditmightnotbewisetodependonbanksforits
futuregrowth.Itsliterallyconstructingthefutureontheeasternedgeofits
land:aclusteroftowersthatonedaywillleasespacetofintechstartups,someof
themincubatedpracticallyinhouse.
Onanygivenweekday,Level39isbuzzingasentrepreneursattendconferences
andcommiseratewithinvestorsinaloungeworkspacewithviewsof
skyscrapersbearingthelogosofCitigroup,CreditSuisse,andHSBC.UBShas
beenrunningexperimentsonissuingsmartbondsinitsblockchainlabhere.
Dopay,astartupbasedherethatenablescompaniestopaytheiremployeesvia
anapp,hasjoinedforceswithBarclays.Afterthecrash,everyonethoughtit
wasgoingtobetoughforawhileandtherewouldbelayoffsbutthensentiment
wouldreturn,VanderKleijsays.Whatnooneexpectedwasfintech.

http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

6/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

&nbsp

?
u
o
y

d
l
u
,wo
y
a
d
o
t

k
ban

t
n
e
v
n
i
uld
o
c

u
o
y

f
I

Iftheresonechiefexecutivewhoshiptothisepicmoment,itsCryan.As
UBSschieffinancialofficerfrom2008to2011,hehelpedsteadytheSwiss
bankasitlostbillionsontoxicsubprimemortgagesandrelateddebt.Nowhes
chargedwithfixing146yearoldDeutscheBankataskthatrequireshimto
liveuptohisreputation,inthewordsofaGermannewspaper,astheicecold
housecleaner.Abettermonikermightbe:tellerofuncomfortabletruths.Ata
bankingconferenceinFrankfurtonNov.23,the55yearoldCEOtookonthe
richpaydaysforinvestmentbankers:Manypeopleinthesectorstillbelieve
theyshouldbepaidentrepreneurialwagesforturninguptoworkwitharegular
salary,apension,andprobablyahealthcareschemeandplayingwithother
peoplesmoney.OnJan.28heslashedbonuspoolsatthebankasamatterof
justice.
CryanhasevenpinedforthestabilityofAmericanbanking.ThebankIwould
lovetorunatthemomentisWellsFargo,hesaidinapressconferenceonJan.
28.Iwouldlovetomake400basispointsinretailbankingandhavea
relativelyeasylife.TheSanFranciscobasedlender,whichrecorded$23
billioninprofitin2015,recentlybecametheworldsmostvaluablebank.
Cryansenvyisunderstandable.WithmostoftheirlegalbillspaidandDodd
Franksruleswrittenandimplemented,U.S.lendersaregettingbackto
business.JPMorganChasehauledinarecord$24.4billioninearningslastyear
inanearzerointerestrateenvironment.TheS&P500FinancialsIndex
http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

7/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

outperformeditsEuropeancounterpart,theEuroStoxxBanksIndex,by14
percentagepointsinthe12monthsendedFeb.12.
Forcedtobalancedifferentpolitical,cultural,andfinancialrulesinamultitude
ofnations,theeurozonesleadersdidntmanagetoputtogetherabanking
unionuntil2013.Ifyourealizehowdependentweareonthebankingsystem,
youalsorealizehowfoolishweweretodealwiththebankslate,saidJeroen
Dijsselbloem,theNetherlandsministeroffinance,duringapaneldiscussionin
Davos.TheU.S.dealtwiththebanksveryquickly,madethemrecapitalize,
madethemtaketheirlosses,andittookusthree,four,fiveyearsmore.
SteveSchwarzman,thechairmanandCEOofprivateequitygiantBlackstone,
suggestedinthesamediscussionthatregulatorswerestiflingeconomicrecovery
inEuropebyleaningtoohardonbanks.Regulationhasmadetheworldmore
dangerous,Schwarzmansaid.Pleasedontsaythatwehaveoverregulatedthe
banks,saidDijsselbloem,whoalsoservesasthepresidentoftheEurogroup,
whichismadeupoftheeuroareasfinanceministers.Westillhaveanumber
ofissuestodealwithtomakethebanksabletosupporteconomicgrowthagain.
Ratherthansayingregulatoryregimesputinplacearesmotheringeconomic
activity,Ithinkitsactuallytheopposite.Whatssmotheringeconomicrecovery
inEuropeistheeffectsofafinancialcrisis.Thatwasntcausedby
overregulation.

&nbsp

http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

8/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

CanaryWharf
Photographer:MarkHenley/PanosPictures

Justbecausebanksarewelcominginnovationdoesntmeantheycancontrolit.
Startupsarereinventingthebusinessofretailbanking.LondonbasedFunding
Circlehasarrangedmorethan$1.5billioninloanstosmallbusinessesin
Germany,theNetherlands,Spain,theU.S.,andtheU.K.since2010,delivering
anaverageannualreturnof7percenttolenders.Thestartupisstilltiny
comparedevenwithmidsizebanks.Bymatchingborrowersandlendersonits
website,itdoesnthavetouseitsownbalancesheettomakeloans.Plus,itgains
anenormouscostadvantagebynotmaintainingabranchnetworkoramountain
ofmoneytocomplywithcapitalratios.Ifyoucouldinventabanktoday,
wouldyou?asksSamirDesai,FundingCirclesCEOandcofounder.
FundingCircleanditsilk,ofcourse,haveyettobetestedinaneconomiccrisis,
andinvestorsclearlyarentsoldontherevolutiontheypromise:Sharesin
LendingClub,theNo.1onlinelenderintheU.S.,plunged68percentinthe12
monthsendedFeb.12.Andbankscouldjustacquirefintechcompaniesandtry
tofoldthemintotheiroperations.ButChristensensaysnolargeorganizationin
anyindustryhaseverbeensuccessfulinbuildingdisruptivetechnologyonits
own.Therestoomuchlegacyintheiroperations,culture,andmanagement
practicestomakesuchaleap.ChristensensayshefoundJPMorganChases
recentdecisiontodistributesmallbusinessloansthroughOnDeckCapital,a
NewYorkbasedonlinelender,groundbreaking.Thebankisessentiallytelling
themarketplacethatittrustsOnDecksmethodologyformanagingrisk.Thats
http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

9/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

hugefortheburgeoningpeertopeerindustry.
YetChristensenurgesJPMorganChasenottobringthetieupinsidethecastle
wallsandrisksmotheringtheinnovation.Theyhavetosetupthesethings
separatelyandkeepthemseparatesotheycangrowinanewspace,hesays.
Thenonebyonethecustomersofthetraditionalbankwillleaveanddomore
oftheirbankinginthesenewstructures.Soyouwonttakethenewtechnology
andintegrateitintotheoldbank.Youlltakethecustomersoutoftheoldbank
andintegratethemintothenewone.

&nbsp

Prettyradical,right?AtDavos,CryansurprisedhisfellowVIPsbyembracing
thegauziestfintechdreamofallacashlesssociety.Cashin10yearstime
probablywontexist,hesaid.ThequotemadeheadlinesacrossGermany.Last
October,CryandispatchedChiefOperatingOfficerHenryRitchottetosetupa
digitalbank.Werecurrentlybuildinganattackerwhoseonlyjobwillbeto
attackDeutscheBank,PaulAchleitner,chairmanofthebankssupervisory
board,saidatthetime.Itsexciting.
Intheend,thebankingindustrystroublescanbetracedbacktoonething:the
costofcomplexity.Fromthemomentbankswentglobalinthelate90s,
skepticsdecriedthesebehemothsastoobigtomanage,letalonetoobigtofail.
Buttheinstitutionsthrivedontheverycreationofcomplexityintheirproducts
andinthemarkets.Now,toparaphrasewhatformerDeutscheBankCEOJosef
Ackermannsaidthen,theresonceagainaflighttosimplicity.Thatswhat
http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

10/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

regulatorsaredemanding.Andthatswhatlegionsofcustomersareexpectingas
startupsdeliverfinancialservicesatthetapofanapp.Theunbundlingof
bankingisundoubtedlycomplicatedandperhapsevenfraughtwithunseen
dangers.Andyetitsreallyallaboutgettingbacktobasics.WithNicholas
Comfort,AmbereenChoudhury,andJeffreyVoegeli

MissingMalaysiaJetMH370
WeeksAwayFromKeeping
SecretsForever
February16,2016

AngusWhitley
AngusWhitley1

http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

11/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

Photographer:JoshuaPaul/APPhoto

AnunidentifiedmanwalkspastMH370relatedstreetartunderaflyoverinKualaLumpur,
Malaysia.

ThemanleadingthesearchforMalaysiaAirlinesFlight370isshowingthe
strainafteralmosttwoyearsoffruitlesstoil.
MartinDolan,headoftheAustralianTransportSafetyBureau,saidhestruggles
tosleepattimes,gnawedbythoughtsthatwreckagefromtheBoeingCo.777
mayhaveslippedthroughthesonarnetscanning120,000squarekilometers
(46,330squaremiles)ofthesouthernIndianOcean.
MH370isweeksawayfrombecomingaviationsbiggestunsolvedmystery
sinceAmeliaEarhartdisappearedin1937.Ofthe3millioncomponentsinthe
jet,onlyonehasturnedupabarnacleencrustedwingflaponReunion
Island,thousandsofmilesfromthesearch.Therehavebeennotracesofthe239
peopleonboard,theirluggageoreventhelifejacketsthatweresupposedto
float.
http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

12/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

Theresalwaysthisquestion:Havewemissedsomething?Dolan,58,saidat
hisofficeinCanberra.Thatsthesortofthingthatwilloccasionallykeepme
awakeatnight.
Someoftheworldsmostexperiencedsearchandrescueexpertsincreasingly
acceptthattheA$180million($130million)searchmayfail.Withoutfresh
clues,thehuntshouldendaboutJune,whenfourshipsareduetofinishcombing
theseasoffwesternAustralia,Dolansaid.WithinarectanglethesizeofNorth
Korea,vesselshavescouredmostofthepatchbelievedtobethelikelyimpact
pointandcomeupempty.

WorkerslookfordebrisoftheMH370onthecoastofSaintAndre,
ReunionIslandinAugust2015.
Photographer:ArnaudAndrieu/EPA

FailurePossible
http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

13/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

Norareinvestigatorsanyclosertoascertainingwhathappenedinsidetheplane
afterittookofffromKualaLumpuronMarch8,2014,forBeijing.
Wewerereadyformostthings,butMH370hasbeenunpredictablealltheway
through,Dolansaid.Itsapossibilitywewillnotsucceed.
Intheaftermath,theInternationalCivilAviationOrganizationispushingfor
commercialaircrafttoreporttheirpositionsevery15minutes.Andthe
underwaterlocatorbeaconsinsidetheirblackboxeswillhavetolastfor90days
insteadofthecurrent30,underEuropeanUnionproposals.Butneitherrule
takesfulleffectbefore2018.
Asiasaviationindustry,meantime,isexpandingatabreakneckpacewith100
millionnewpassengerstakingtotheskieseveryyear,accordingtoBoeing.In
thenexttwodecades,theworldsfleetof22,000aircraftissettodouble.

http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

14/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

SometimearoundJune,Australianauthoritieswillfinishscouringa
120,000squarekilometersearchareaformissingMalaysiaAirlines
FlightMH370.TheplanedisappearedinMarch2014.
Sources:AustralianTransportSafetyBureau,Boeing,Bloomberg
research

BelgiumSized
LarryStone,chiefscientistatReston,VirginiabasedconsultantMetronInc.,has
trackedmissingaircraftandshipsforhalfacentury.Stonemappedoutthe
restingplaceofAirFranceFlight447,whichwasfoundtwoyearsafter
plummetingintotheAtlanticOceanwith228peopleaboardin2009.
Thelocation,sizeandcharacteristicsoftheunderwatersearchforMH370make
itthetoughestheseverseen.Iwouldntbesurprisediftheydidntfindit,
Stonesaid.
Thewatersinthesearchareaareupto6kilometers(4miles)deepandpeppered
withtrenchesandsubmergedpeaks.Lastmonth,atowedsonarvehiclecollided
withavolcanorising2,200meters(7,200feet)fromtheseabed.Thedevicewas
severedandsanktothebottom.
Vesselsstillhavetoscanabout35,000squarekilometersanareabiggerthan
Belgium.ThenewestreinforcementisaChineseshipwithhighdefinitionsonar.
http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

15/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

TheDongHaiJiu101willfocusonareasoftheoceanfloorthataredifficultto
scanwithconventionalsonarwhenitarrivesthismonth,Dolansaid.

PhoenixAutonomousUnderwaterVehicle(AUV)Bluefin21is
cranedoverthesideofAustralianDefenceVesselOceanShieldin
thesearchformissingMalaysiaAirlinesflightMH370inApril
2014.
Photographer:LeutKelliLunt/AustraliaDepartmentofDefencevia
GettyImages

HotSpots
Shipsarerecheckingabout100locations,someoftheminsideanovalshaped
patchtowardthesouthernendofthesearcharea,Dolansaid.Thishotspotis
mostlikelytocontainthewreckage,accordingtoAustraliasDefenceScience
andTechnologyGroup,agovernmentagencynormallydevotedtonational
security.
Buteventhemostcomprehensivesearchwontsatisfythevictimsfamiliesifit
fails.
Wearegoingtotryashardaswecantolobbyforthesearchtocontinue
http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

16/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

beyondJune,saidGraceSubathiraiNathan,28,whosemotherwasapassenger.
Ineedananswer.
ThedisasterunfoldedwhenairtrafficcontrollerslostcontactwithMH370less
thananhouraftertakeoffasitapproachedVietnam.Militaryradarshowedthe
planetookaleftturn,loopedbackacrossMalaysiaandheadednorthwestupthe
StraitofMalacca.

FlightLieutenantJaysonNicholslooksatamapashefliesoverthe
southernIndianOceaninsearchofthemissingMalaysianAirlines
flightMH370.
Photographer:Pool/GettyImages

SatellitePings
Radarcontactthenwaslost,butanorbitingsatellitepickeduppingsfromthe
plane.AnalysisofthosehourlycheckinsindicatesMH370cruisedsouthover
theIndianOceanforaboutsixhours.
Theyvedonearemarkablejobtogetanythingusefuloutofitatall,said
VaughanClarkson,aspecialistinradarandtrackingattheUniversityof
http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

17/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

Queensland,Australiawhohelpedcalculatetheflightpath.Youretryingto
trackafastmovingaircraftwithupdatesonlyaboutonceanhour.
Theextentofhumaninterventioninthesilentdisasterisntknown.Thelast
recordedwordsfromMH370spilots,at1:19a.m.onMarch8,were:Good
nightMalaysianThreeSevenZero.Inaworldwherea$100smartphonecanbe
trackedforfree,the$250millionjetvanished.
MalaysiaPrimeMinisterNajibRazakhassaidtheplanewasdeliberatelysteered
offcourse,andthehomesofthepilotandcopilotweresearched.TheU.S.
FederalBureauofInvestigationalsoanalyzedthepilotspersonalflight
simulatortonoavail.
Alltheevidencesaysclassicautopilotflight,Dolansaid,emphasizingthat
otherauthoritiesaretryingtoreconstructeventsinsidethecabin.

MathematicalProbability
ThedisasterwasthebeginningoftheendforMalaysiaAirlinesasalisted
entity.FourmonthsafterMH370disappeared,FlightMH17wasshotdownover
Ukraine.AMalaysiangovernmentinvestmentcompanyboughtouttheairline
thesameyearaspassengertrafficslumpedandlosseswidened.
Afailedsearchwouldleaveabadimpressionontheindustryasawhole,but
particularlyonMalaysiaAirlines,ChristophMueller,thechiefexecutive
officer,toldBloombergTelevisiononMonday.
BackinCanberra,theATSBisinvestigatingabout130incidentsintotal
rangingfromafreighttrainderailmentinQueenslandtoaseaplanecrashoff
northeastAustralia.
YetDolansayshesconsumedbyMH370.Hespeaksmostlyinasoft,lowtone,
http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

18/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

pausingoftenashechooseshiswords.Atatableinhisoffice,hereferstoamap
ofthesearchzoneinfrontofhimasheoutlinestheanalysisoftheplanesfinal
moments:
Therightenginerunsoutoffuelfirst,andwithin15minutessodoestheleft.
Theresjustenoughfuelremainingforthesatellitedataunittorebootandbeam
afinalmessage.Thentheplaneprobablybanksleftandspiralsintotheocean.
Basedonthatsequence,searchersareprioritizinganareawithin20nautical
milesoftheaircraftslasttransmission.

LastChance
Investigatingtheotherpossibilitythatsomeonewassteeringtheplaneand
glideditwithoutpoweruntilithitthewaterwouldmeantriplingthesearch
area.Thatsaveryunlikelyscenario,anditrisksoverwhelminginvestigators,
Dolansaid.
Governmentsarejustnotwillingtoputtheresourcesintothatsortofpotential
extension,hesaid.
Shipsscanningtheseaflooralreadycollectedabout20petabytesofimaging
data.ThatsenoughtohousetheentiredigitalcollectionoftheU.S.Libraryof
Congressseveraltimesover.
Evenafteracknowledgingthedifficultiesofsearchingamassive,remoteand
http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

19/20

2/16/2016

EuropeanBankNightmareFarFromOverasFinesandFintechLoomBloombergBusiness

deepareaoftheocean,Dolansaidhewasconfidenttheplanewillbefound.
EverymorningIwakeupandcheckwhatsgoingon,andIhopethattodays
goingtobetheday,hesaid.

Underwatersearchareamap.
Source:AustralianTransportSafetyBureau

http://www.bloomberg.com/news/features/20160216/europeanbanknightmarefarfromoverasfinesandfintechloom

20/20