“Regulators should not give in to special pleading from banks in implementing the reforms introduced as a result of the financial crisis.” That statement ought to be mundane and uncontroversial. After all, it is only two years since the Banking Reform Act became law, forcing banks, among other things, to erect an internal ringfence between their retail operations and their investment banking units.
What’s more, the effects of the last blow-up is still with us. The state still owns 73% of Royal Bank of Scotland and 10% of Lloyds Banking Group and Northern Rock’s mortgages are only now departing from the public books in meaningful chunks.
The fact that Andrew Tyrie, chairman of the Treasury select committee, felt obliged to stiffen regulators’ resolve in a speech on Monday night speaks volumes. He can see what’s happening: the banking lobby, with its swagger restored, is complaining loudly about the cost of new regulations and is trying to secure concessions on ringfencing before the deadline for implementation of 2019.
Consider Tyrie’s speech a necessary counterblast to the grumblers. As he said, the biggest problem of all – how to wind down safely a failing bank without another taxpayer-funded bailout – has not yet been fixed. In July, Mark Carney, governor of the Bank of England, conceded regulators were not yet in a position to “resolve”, in the jargon, the UK’s largest financial institutions.
“This as unacceptable for the public finances as it is unsustainable politically,” said Tyrie. “The taxpaying public’s tolerance of another bailout is low, to put it mildly.”
In other words, the banks should stop complaining and get on with implementing the reforms parliament ordered. And they, and regulators, should remember that any bank that tries to game the ringfencing rules can be broken up. Well said – but it’s alarming that Tyrie felt the need to speak out.
Succession planning goes awry at Nationwide
Chief executives of Openreach don’t last long. Liv Garfield did two years before she was poached to run water company Severn Trent. Now her successor, Joe Garner, after an even shorter stint, is off to be boss of Nationwide. You can’t blame either escapee. For an ambitious executive, both jobs offer more excitement than managing BT’s wires and broadband infrastructure while fending off criticism about shoddy service from Sky, TalkTalk and Vodafone.
In Nationwide’s case, it’s an odd moment to look outside for a chief executive to succeed the long-serving Graham Beale. It has never happened at the mutually owned lender since at least the 1960s, when Nationwide’s history goes fuzzy because it was the product of combining more than 100 societies. What’s more, Nationwide is doing well – it clocked up profits of £1bn last year, supposedly by taking a different approach to the big banks.
One can admire the board’s commitment to appointing the best person for the job, as it judges things – Garner’s banking credentials come from his previous job running HSBC in the UK. All the same, Nationwide members might wonder if something has gone wrong with succession planning.
Holidaymakers unlikely to celebrate hotels tie-up
It’s the biggest deal since the last big deal. Marriott International is buying Starwood for $12.2bn (£8bn) to form a hotel company with 1.1m rooms, 5,500 properties and 30 brands. The direct savings in this exercise seem small – they are put at just $200m. As with the big brewing deal – Anheuser-Busch InBev’s £68bn takeover of SABMiller – the pursuit of size seems to be about deadening competition and acquiring greater power to push up prices over time. Consumers may not cheer. One of these days, we’ll be able to go anywhere in the world to sit in the bar of a single company’s hotels drinking a single company’s beer, all sold with the illusion of greater choice.
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