The failings of City watchdogs is not a tremendously festive subject, but it is an important one.
Andrew Bailey, the Governor of the Bank of England, has been in the firing line over the collapse of a firm called London & Capital Finance, which went under while he was chief executive of the Financial Conduct Authority (FCA) regulator, leaving 11,600 victims out of pocket for £237million.
Much more dangerous for Bailey is the Neil Woodford affair: the disgraced investment manager’s funds were frozen on his watch.
Bank of England governor Andrew Bailey has been in the firing line over the collapse of a firm called London & Capital Finance, which went under whilst he was chief executive of the FCA
In fairness to him, these issues were no secret when he was appointed to the top job, and running the FCA is always a hospital pass.
But how unfortunate that the man in charge of the stability of our financial system at such a difficult juncture for the economy is so vulnerable to attack over his tenure.
Regulation in this country is in fact in far better shape than it was ahead of the financial crisis. In the years up to 2008, a laissez-faire attitude had taken hold and no-one was on top of the enormous build-up of debt, much of it off-balance sheet.
Worse, the bosses of the large banks, men like Bob Diamond and Fred Goodwin, held the regulators in open contempt and shamelessly gamed the rules.
That has changed. The former ‘tripartite system’, where the Treasury, the Bank and the Financial Services Authority were collectively responsible for stability, allowed problems to slip through the cracks. Quite rightly, it was abolished.
No chief executive nowadays would dare behave like a Bob or a Fred. Thanks to the learning of lessons in the credit crisis, the banks are well capitalised and able to support firms through Covid-19.
But the FCA is not up to scratch. There seems to be a culpable lack of curiosity about anything deemed to lie outside of its remit, a deafness to whistleblowers and an absence of will to find a way to investigate.
Important cases slip through the net, as I have seen at first hand. In 2017 and 2018, while at our sister paper the Mail on Sunday, I led an investigation into a man called Gerard Walsh, who had a documented record of fraud and deception.
Despite his background of dishonesty, he was able to found a company called the Royal Bank of Scotland Shareholders Action group, which portrayed itself as a campaigning organisation that would help small investors win compensation from the bank. When we raised serious concerns about the group, no-one was prepared to carry out a proper probe.
The group was not regulated by the FCA, nor did it seem any regulator was prepared to take responsibility.
The case involved hundreds of millions of pounds paid out by taxpayer-backed RBS, yet there was a total absence of interest in where that money was going from various regulators and from fraud investigators.
Separately, I remember talking to a very senior regulator just ahead of the implosion of Equitable Life two decades ago.
At that point it was obvious there were serious problems, but the official merely opined that putting an insurer into run-off was not such a bad thing for savers in the long-term.
His indifference to the anguish and suffering about to ensue took my breath away. Even now MPs and victims are campaigning for another £2.6billion of compensation.
Our watchdogs can console themselves that it could be worse – they are not as bad as Bafin, the German regulator, which the Financial Times this week argued should be disbanded.
Unbelievably, when concerns arose about a payments company called Wirecard, it did not address the worries but instead launched a criminal complaint against the journalists at the pink ’un who were exposing the scandal.
In the UK, thankfully, our regulators have not sunk as low as that. But they do need to open their eyes and ears.
Ruddy heck!
Eight years ago my colleague Alex Brummer and I wrote a piece – The Man Who Sold Britain – about Sir Nigel Rudd.
The question we posed was whether the veteran industrialist and serial chairman was a deal maker extraordinaire, or a restless capitalist selling some of our most evocative assets.
He is still at it. Signature Aviation, a company he chairs, which serviced Spitfires and Hurricanes in World War Two, has gone under the hammer. It now looks set to be sold to US private equity giant Blackstone.
Whatever the merits of that deal, no-one can accuse Rudd of losing his touch.
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