Goldman Sachs Group Inc. (GS) Vice Chairman Michael S. Sherwood said his firm would refuse another deal like the derivative it sold Greece that masked the nation’s growing debt to help it meet European Union standards.
“We absolutely wouldn’t do a transaction like that today,” Sherwood, 48, said in an interview posted on Channel 4’s website on Thursday in London. “There have been transactions of that ilk that have been presented to us by other European sovereigns that we’ve turned down because we felt there wasn’t the appropriate transparency surrounding them.”
Goldman Sachs sold Greece a derivative in 2001 that disguised a loan, helping the nation meet EU targets. The deal later cost Greece billions of euros and the nation’s deteriorating finances prompted multiple bailouts from the EU in the wake of the financial crisis.
The Greek government owed about 600 million euros ($808 million) more than the 2.8 billion euros it borrowed on the day the deal was struck, and Goldman Sachs persuaded Greece not to test the deal with competitors, Spyros Papanicolaou, who took over the country’s debt-management agency in 2005, said last year. Goldman Sachs wasn’t accused of wrongdoing related to the transaction.
Goldman Sachs has sought to burnish its reputation after being sued by the U.S. Securities and Exchange Commission for misleading investors on a 2007 sale of a mortgage-linked investment called Abacus 2007-AC1. J. Michael Evans and E. Gerald Corrigan, 72, led a business-standards committee that was set up in 2010 to review the firm’s policies and practices.
Evans, 56, said in May that the firm has set up a “new-activity committee” to evaluate and approve suitability when clients undertake transactions that carry new risks. He said Abacus “would look a lot different” if structured today.
Sherwood is one of four vice chairmen at New York-based Goldman Sachs and co-heads the firm’s European business out of London. This month, he took over the bank’s emerging-market operations from Evans, a vice chairman who’s retiring.
“We’re turning down things we would have done 10 years ago, whether it’s due to the sophistication of the client, whether it’s due to reputational issues, whether it’s due to, ‘Do we think that’s an appropriate transaction for the client to take on,’” Sherwood said in the Channel 4 interview. “I’m not talking about legality here. Everything we did we felt was legal, but here we’re talking about what’s appropriate and what’s reputationally sensitive.”