As part of the LBMA’s Voices Project Michele interviews Simon Churchill as he reflects on his career in the bullion market. Simon retired in April 2015 having worked in the London bullion market for over 40 years. He has been a great supporter of the LBMA, first serving on the Physical Committee and, since 2009, on the Management Committee.

The Johnson Matthey offices in Royston, Hertfordshire.

On 19 August 1974, Simon joined Johnson Matthey Bankers. His first role was in the coin department, which meant daily physical contact with gold and silver. His entry into the market coincided with an eventful period in its history. Between 1973 and 1976, substantial private investment in Europe and elsewhere, and the impending liberalisation of gold in the USA, which meant American citizens were able to buy gold for the first time since 1934, led free market prices to rise to higher and higher levels. Late in December 1974, a peak fixing in London of $197.50 was reached. Simon fondly recalled thinking at the time, ‘yes, this is it, the sky is the limit!’ The price rise stimulated a rush to buy coin and Johnson Matthey Bankers sold huge volumes, handling all ages of sovereigns, Krugerrands and new bullion coin, and holding stocks of both Austrian and Mexican restrikes, and occasionally US Eagles and Double Eagles. Unfortunately, the anticipated American demand and rush to buy gold failed to materialise and investment interest fell away sharply in 1975, although the trend towards gold liberalisation and its ownership and dealing continued, with markets and trading centres opening in other countries. This created a wider base for dealing and enhanced the opportunities for London as the premier gold market.

“Between 1973 and 1976, substantial private investment in Europe and elsewhere, and the impending liberalisation of gold in the USA, which meant American citizens were able to buy gold for the first time since 1934, led free market prices to rise to higher and higher levels.”

After an active start in the Coin department, Simon briefly left it, moving around the bank for six months while gaining experience in other sectors. He soon moved to the Bullion department where he continued his training under the watchful eye of Frank Martin, Manager of the bullion back office. Simon had been pre- warned by a colleague that “Mr. Martin could be a bit tricky at times!”. But Simon recalled that they got on reasonably well and while he was ‘Mr. Martin’ to everyone else, he was always ‘Frank’ to him.

Johnson Matthey Bankers (JMB) was incorporated in 1965 and was part of the Johnson Matthey Group, with a trading history since 1817 that concentrated its efforts on the refining, fabrication and marketing of the gold, silver and platinum group of metals. JMB was an authorised bank and member of the London Gold Market, holding a seat on the London Gold Fix and the Commodity Exchange in New York. It traded in precious metals on a global basis with central banks, government mints, commercial banks, international traders, mining organisations and precious metal fabricators.

Simon held a close working relationship with the Johnson Matthey refinery at Royston. Simon remembered that his first visit to Royston was in 1976. He described the process as “extremely interesting” and one that has held a fascination for him ever since. Reflecting on the sight that met him on his first visit, he was reminded that: “The produce that we are involved in is an interesting product. You can’t get away from it. Actually, seeing it, holding it, handling it, seeing how it is refined. But the refinery itself was a filthy place. I don’t know what I was expecting, but it was a bit of an eye-opener. I remember being shown around one of the melting areas and there was this tray of what looked like soot and I said: ‘Soot, are you going to throw that away?’ They said: ‘No, that is going to be refined, that’s twenty per cent gold!’”

Over the years, Simon took a keen interest and learnt more about the refining process, but his main area of expertise was in ensuring physical stock levels of bullion kept pace with customer demand and running the logistical side of the business.

I was intrigued to learn from Simon that during the price rise of gold at the end of 1979 and the start of 1980s, when it peaked at $850 an ounce, there were only five bars of gold in the Johnson Matthey Bank vault. Simon explained that was because:

“Nobody wanted it, nobody was delivering metal, nobody was drawing metal; although, I remember one occasion when one of the banks in Switzerland called [JMB] for fifteen tons of silver that [JMB] didn’t have. A quick call to the refinery and some of the Indian silver coin, which had been backing up for years and years, was processed. Eventually, over the next three or four years, there was more than 1,000 tons of silver a year coming out of the Johnson Matthey refinery.”

Silver took on a more prominent role during the 1980s, the era of Bunker Hunt when the Hunt brothers tried to corner the silver market and the price rose to $50 dollars an ounce. As the price came down, having gone from no silver in the vaults, Simon remembered how it came from over the Atlantic by the ton: “Shiploads, plane loads. By the end of 1980, it was just pouring out of our ears. After being checked over by vault staff, it went into a hole in the ground!”

Simon was also responsible for maintaining an adequate supply of small gold bars, overseeing the weekly production levels dictated by demand from the Far East and Dubai. He recalled the limiting factor in the production of the bars at the time, as they were still made by hand. Describing the process, he observed that:

“At a time before automation, there would be a bank of women sitting at a high bench with various grades of grain in front of them. They would pour the grain, then weigh it, putting a bit more in just until the charge was the right weight for the kilo bar or ten tola bar, even to the extent that it would be one bead of grain just to get the weight right.”

Sometime during the 1980s, bar production eventually transferred to an automated process.

While there have been many interesting periods that stand out in Simon’s career, one unfortunate incident that stood alone was the Brinks Mat bullion robbery that took place on 26 November 1983, as the vast majority of the bullion that was stolen was there because he was shipping it! He recalled the events leading up to the theft:

“The bullion was all picked up from [JMB] on the Friday afternoon. The refinery used to deliver on Friday, so it was all packed up ready for Brinks to pick up and then it would be flown out on the Saturday Hong Kong flight, then distributed from there up to Tokyo or out to Singapore, or it would stay in Hong Kong. The Dubai flight would also leave from London and just go straight to Dubai. I knew that the flight left from Gatwick Airport. On that Saturday morning, the phone rang about 11 o’clock in the morning and it was a friend who said: ‘Have you heard the radio?’ I said: ‘No, why what has happened?’ There had been a gold robbery at Heathrow and I said. ‘No, it can’t be ours because it flies out of Gatwick.’ What I didn’t actually know was that they [Brinks] stored it at Heathrow and trundled it down to Gatwick, rather than hold it at their City branch.”

“Perhaps the most life- altering experience for Simon was learning of the failure of Johnson Matthey Bankers on 1 October 1984.”

Brink’s insurers dealt swiftly with the loss and the fallout from the theft was kept to a minimum. Simon remembered that “the loss was covered at the Monday morning ‘Fix The refinery had to work overtime, because the customers still wanted their gold, but come that Friday everybody’s position was back exactly where it was.” It is of no surprise that shipping procedures have since been reviewed.

Simon’s role at the Bank meant that he was one of the first members of staff to find out about the impending collapse, having received a phone call on the Saturday morning ahead of the official announcement and been told: “You have to come in to work now!” As he headed into the office, he wondered what was so important, only to be greeted by his head of department who informed him that the bank was in serious trouble because it couldn’t meet its commitments. It was technically bankrupt. Throughout the 1980s, mainly on the back of gold profits generated during the earlier price rise when gold and silver hit $850 and $50 respectively, the bank had grown particularly rapidly by lending very large sums to a small number of little-known Asian businessmen.

During the previous week, rumours had begun to circulate that one of the ‘Fixing’ companies was in trouble. The Bank of England, in order to maintain stability in the gold market, felt it necessary to step in and look for a new owner for JMB. Over the weekend, emergency meetings took place at the Bank and representatives of all possible parties concerned were summoned for a series of conferences. Many of the top representatives of the Bank and other firms had been away in Washington at the IMF, including the Governor, Robin Leigh-Pemberton, and it was his deputy, Kit McMahon, who took the lead in negotiations on behalf of the Bank of England. Over the course of the weekend, more than 200 people were involved. The seriousness of the situation was laid out by both Evelyn de Rothschild and Michael Hawkes (of Kleinworts). They spelled out to McMahon the danger to the London gold market and possibly even the London inter-bank market if JMB was allowed to go. David Kynaston (2002) in The City of London, A Club No More recounted how at one point Hawkes mischievously decided to leave the room he had been assigned and have a quiet snoop around:

“In one room there were the Johnson Matthey bankers’ books and I spent a glorious two hours going through them. There wasn’t a single name I’d ever heard of and the amounts, £60 million to one name, £30 million to another, were absolutely staggering. We spent ages hanging around, lobbying every Bank of England man we could find and urging that Johnson Matthey must be rescued, otherwise the gold market would go forthwith to Switzerland and the malaise in the gold market might spread to other members of the market, perhaps even to Midland Bank… ‘til 10:30 at night all this seemed to no avail, and I came to the conclusion that the Bank of England had decided to let Johnson Matthey go …”1

It was hoped that following an expression of interest and talks with the Bank of Nova Scotia, a bid would be placed. Negotiations broke down, having failed to secure indemnification against potential lawsuits and it was realised at the Bank of England that there was no alternative but to take responsibility and launch its own rescue of JMB.

On the Monday morning, the rest of their colleagues, who were instructed to close all the blinds and not answer any telephones, joined Simon, his boss and a chap who ran the Settlements department, who had also worked over the weekend. At 09:30, a low-key announcement came from the Bank of England that JMB had collapsed and had been purchased by the Bank for £1, enabling JMB to trade normally and meet all its commitments.

“At 9.30 a low key announcement came from the Bank of England that JMB had collapsed.”

Cartoon by Nicholas Garland published in the Daily Telegraph, 18 December, 1985, reproduced by permission of the Daily Telegraph and the British Cartoon Archive, University of Kent,

Simon recalled that it had been a real shock at the time. In the months that followed there was a tremendous amount of upheaval. While the Bullion department was later exonerated from any blame in the failure of JMB, at the time, some politicians decided that it was the main cause. Both Dennis Skinner and David Owen expressed concerns in the Commons over the rescue package, suggesting that the effects of failure had been exaggerated and hinted at an establishment cover-up. Later in his memoirs, the Chancellor at the time, Nigel Lawson,4 explained his position in the JMB affair: “The more I discovered about it the less surprising its collapse became – but by the same token the more inexplicable the Bank’s failure, as the supervisory authority to step in at a much earlier stage. But my interest was not in raking over the JMB issue as such: it lay in strengthening the system of banking supervision in the UK, so that a debacle of this kind was far less likely to occur in future.

In December 1984, Lawson announced to Parliament the setting up of a Committee to look into the UK system of bank supervision and make recommendations. An internal review was carried out and Robin Leigh-Pemberton chaired the committee. The findings of the report were published in June 1985, from which neither the Bank of England nor the JMB auditors, Arthur Young, emerged well. By tradition, the Bank of England had supervision of the banking system and, until 1979, “Banking supervision had been conducted on an entirely informal and non- statutory basis, with the Bank relying on what was officially termed ‘moral suasion’ and more commonly ‘the Governor’s eyebrow’ to secure its objectives.”6 Legislation introduced in 1979 came on the heels of the secondary banking crisis of the early 1970s and a European Community directive that required all member states to have bank supervisory legislation in place. The JMB failure demonstrated that the 1979 Act was inadequate, and the Leigh-Pemberton committee made some important recommendations. The subsequent 1987 Act that came into effect went well beyond the recommendations put forward and the key feature that came out of the JMB affair was the setting up of a Board of Banking Supervision.7 David Lascelles of the Financial Times captured the enormity of these changes in his article that appeared two days after Lawson’s statement in the Commons:

“For sheer drama, it is a tale of banking incompetence on a scale that defies belief: a small bank manages to lose £248m, more than half its loan book of £400m, and forces the Bank of England to mount one of the most elaborate rescue operations ever seen in the UK, because it happens to be a vital cog in the delicate machinery of the international gold market…

But for the history books, the big story will be the turning point that JMB represents in the evolution of banking supervision in the UK: the changes it has set in motion well may mark the end of the gentlemanly codes by which the Bank of England and the City have abided for decades, founded on trust and frankness.

Instead, the teeming ranks of the 600 banks now crammed into London will be kept in line with more form-filling, closer scrutiny by accountants, more frequent meetings with a beefed-up team of Bank supervisors and a string of new regulations that will be devised in the coming months.

‘A sad day, but necessary’ was how a senior banker viewed the scene yesterday…”8

While the Bank had effectively disregarded all manner of danger signals, the auditors had performed little better. The Bank announced its intention to sue the accountancy firm and was later awarded substantial damages.

During the period that JMB was under its direct supervision, the Bank of England sent in sets of auditors and inspectors to look at the business and locate the exact cause of the collapse. They were to set the business on a good footing prior to the Bank selling it on to Westpac Banking Corporation in 1986, which had a subsidiary company that traded bullion in Australia, Mase Westpac Limited. Simon described the sale as “just a name change over the top of me” as he and his colleagues moved over to the new Mase Westpac London office, which from the deal now owned a seat on the ‘Fixing Company’ and a full banking licence. According to Simon:

“Mase had a completely different outlook as it began to make changes, concentrating solely on bullion. Foreign Exchange became a subsidiary to the Bullion department, Doc Credits went completely, the Banking Hall was closed, the Coin Department was closed. The bank shrunk from around 300 people to 120, maybe even less than that.”

One of the improvements initiated by the Bank of England during its time as caretaker was to implement some technical changes, in particular the installation of a computer system. It had been a long drawn-out process in which a software program had to be written, developed, installed and tested, but once in place, it meant that Simon had instant information at his fingertips.

“For sheer drama, it is a tale of banking incompetence on a scale that defies belief: a small bank manages to lose £248m, more than half its loan book of £400m.”

He remembered how:

“Instead of having to sit down and work something out on a scrap of paper, with a pencil and a calculator, you just hit some buttons, and something would appear. You would be able to see how many bars you had in stock of a particular quality. You would be able to see if you had allocated it and once allocated, it would disappear from view so you couldn’t reallocate it. You could hit another couple of buttons, and it would produce a bar list for you, so you didn’t have to be there on a typewriter bashing away at it.”

“Instead of having to sit down and work something out on a scrap of paper, with a pencil and a calculator, you just hit some buttons, and something would appear.”

The LBMA Management Committee at the LBMA’s Silver Anniversary Dinner in December, 2012. Simon is located on the back row, fifth from the right.

The system that made life so much easier has only just, in 2014, been superseded by a new system.

In 1993, Westpac announced that it was selling the operation to Republic National Bank of New York. Again, Simon described the sale as “just a name change over the top of me”. This time he and his colleagues moved from the office in King William Street to Republic’s London offices in Monument Street. Republic already had a small Bullion department, just two people. In acquiring the venture, it gained a full banking licence and a seat on the ‘Fixing Company. Simon was relieved that everything just carried on as it had before. He was almost left alone to get on with it, mainly because Republic had never traded bullion on that scale before. Perhaps it was because Republic had confidence in the bullion team, as in the past, it had always had a close interaction with Johnson Matthey Bankers and Westpac, being a large customer of both.

Under the new banner, life changed. It became more streamlined, more efficient and life carried on until in 1999 when it was announced that HSBC would buy Republic. Simon reflected that on learning the news, he “knew his luck had run out because HSBC had a fully functioning Bullion department in London”. And so it came to pass that when HSBC took over the business in January 2000, it would only be a few months before Simon and his colleagues received their redundancy notices. He took the summer off to job hunt and enjoy the Olympics before working for a short period at Standard Bank, ahead of joining Brinks, where he remained until his retirement in April 2015. Following the reflections of his extremely interesting career, Simon commented that not much more could be discussed of his time at Brinks without the need to “shoot me afterwards”. There was only one question still to ask, if he had his time again, would he do anything different?, to which Simon replied: “I really don’t know, it is a difficult question to answer, but somehow I fell into this business. I seem to have gained a reputation where people know me and trust me. What more could you ask for?”

Dr Michele Blagg (BA, MA, PhD) is an independent Research consultant and Visiting Research Associate at the Institute of Contemporary British History (ICBH), King’s College London. In 2015 she was awarded a certificate in Global Risk Analysis & Crisis Management from Vesalius College, Brussels.

Her main areas of interest are financial and business history with special regard for the development of the London bullion market and those who work in the industry. Her doctoral research focused on the business operations of the Royal Mint Refinery, a bullion refinery operated by N M Rothschild & Sons between 1852 and 1968, which provided a detailed picture of the growth and external threats faced by the London bullion market. She further extended her knowledge of the London market while engaged as a Research Consultant for the LBMA on the oral history project Voices of the London Bullion Market. The aim of the project was to preserve for the record the development of the LBMA, its structure, its place in the City’s financial system and its global presence.

She teaches on the MA in Contemporary British History at ICBH and assists with the Witness Seminar Programme. She is a Trustee and member of the Executive Committee of the Business Archives Council and is involved in the annual ‘Meet the Archivists’ workshop held in the City that aims to explore ways in which research students can identify and use business records. She can be contacted at