ALEX BRUMMER: Enforcers in the spotlight over the Greensill collapse

Enforcers in the spotlight: How could the FCA and the Bank of England fail to see the Greensill collapse coming? asks ALEX BRUMMER

Better late than never. Having at first declined to hold hearings on the Greensill scandal, the chairman of the Treasury Select Committee Mel Stride is now in full cry.

It took immense political focus on the crass lobbying activities of David Cameron for up to seven separate probes into Greensill to be triggered.

What has been missing from the narrative is any public debate about the role of regulators in allowing this excrescence to develop. 

In the frame: It took immense political focus on the crass lobbying activities of David Cameron for up to seven separate probes into Greensill to be triggered

Not before time the committee is to hold hearings on ‘Lessons from Greensill’ and will be calling the Bank of England’s governor Andrew Bailey and the chief executive of the Financial Conduct Authority Nikhil Rathi to testify.

The mystery is how, after the catastrophe of the 2007-09 financial crisis, no City regulator was alert enough to notice the rise of a multi-billion shadow bank, with tentacles stretching to Germany, Switzerland, the US and Australia, sitting in the heart of London and engaged in dodgy lending practices.

What is predictable is that when the City grandees make their appearance, there will be much talk of perimeters – activities beyond supervision – as there was when London Capital & Finance collapsed. 

European-style rule-based regulation may also be invoked for limiting the enforcers’ ability to act. Bailey used both explanations in providing testimony on LCF and the Neil Woodford scandal. 

The City is anxious to build a reputation as Europe’s go-to place for financial technology. There is a proliferation of new players in Revolut, Atom Bank, Monzo and Starling. Greensill, bringing new technology to supply-chain financing, looked to be part of this.

The danger signs about Greensill were everywhere. It deployed a second division auditor, Saffery Champness, when the big four fought shy. 

Lending was concentrated on a narrow number of clients, including Sanjeev Gupta’s GFG Alliance, a loose collection of steel and metal firms now collapsing like dominoes.

There were questions in the Lords as to what Greensill was up to in Switzerland. It turned out it was passing on invoice-backed loans to fund manager GAM and then Credit Suisse. These were diced and sliced, insured by Tokio Marine and sold onto unsuspecting investors.

It is an embarrassment for the FCA and Bank of England that all of this took place in plain sight, yet the only enforcers taking an interest are in Frankfurt and Zurich. UK regulators have so far escaped scrutiny but the moment of truth is approaching.

Frock fever

When online fashion purveyors Asos and Boohoo snapped up Arcadia brands, it was clear immediately that they were not interested in the High Street.

Primark is living proof that if you have the right offering, customers will rock up. The reopening of English and Welsh stores last week has brought shoppers back in record numbers. 

After months living in joggers, tracksuits, woolly socks and pyjamas, it is now spring and summer frocks, blouses and trousers which are in demand.

Primark has maximised the footfall in its stores by protecting tills with Perspex to minimise delays at check-outs. Marble Arch in the heart of London has been adversely affected by a lack of overseas visitors.

The group expects 68 per cent of selling space to be open by the end of this month. Ireland and chunks of Europe are closed still. 

Owners Associated British Foods also reports that US stores on the Eastern Seaboard in Miami and Chicago are going well.

In spite of the national surge in digital shopping, chief executive George Weston is adamant that its website is for promotions only and the margins don’t work for home delivery. 

With income from Twinings tea, ingredients and sugar strong, ABF feels confident enough to refund £21million of furlough to the Government and restart the half-year dividend after a 2020 break. Full year results will be down, but far from out.

Job lot

No pandemic measure has been more expensive than furlough, which has already cost £62billion and rising.

But it has performed well. Mass unemployment has been avoided, the overall jobless rate is off its peak at 4.9 per cent of the workforce and vacancies are rising. 

The real impact won’t be known until furlough ends in September, but depression-era dole queues predicted by the Bank of England and others at the start of Covid have been avoided. 

Don’t hear very much about that from Labour.