Last week’s deadline did not allow me to report from ringside at the Mansion House dinner, but there was so much to observe that I hope you’ll forgive a late dispatch. What a vivid guide to City psychology and precedence it offered.
In the anteroom, Lord (Jim) O’Neill, the Treasury’s new Northern Powerhouse minister, could be seen chatting to ex-BP chief Tony Hayward, now chairman of mining giant Glencore Xstrata. At the top table, HSBC chairman Douglas Flint was carefully separated (by António Horta-Osório of Lloyds) from Governor Carney, so they could avoid discussing HSBC’s plans to move back to Hong Kong. But in prime place next to George Osborne was Jayne-Anne Gadhia of Virgin Money — which the Chancellor called ‘that great challenger’ in his speech: there’s a turnaround from 2007, when Virgin wasn’t thought fit to buy busted Northern Rock.
And among the lower-table crowd were lots of gossips — offering, among other things, a guide to deputy governors of the Bank of England, of whom there are four, or possibly five. Most glamorous is Egyptian-born Dame Minouche Shafik, who chaired the Fair and Efficient Markets Review; most anonymous is Sir Jon Cunliffe, who ‘does the political stuff’; but ‘blue-eyed boy’ is Andrew Bailey, who has made a success of the Prudential Regulation Authority, while its counterpart the Financial Conduct Authority (run by Martin Wheatley, who is not a Bank man) is ‘a bit of an embarrassment’.
The main dish, by the way, was cannon of lamb, and the dessert was mostly rhubarb — as, in a sense, were the between-course speeches by the Chancellor and the Governor, timed for the 10 p.m. news. Carney’s elaboration of structures and jail sentences that signal the end of what he called the ‘the age of irresponsibility’ was an important City moment dulled by lifeless delivery, barely audible to the hall. One insider muttered, ‘Well, at least he was better than last year.’ Another whispered: ‘George’s people are running the PA system.’
The day has come
Be that as it may, we learned that Dame Minouche’s review will give birth to a new industry-led ‘FICC Market Standards Board’ — FICC standing for fixed income, currencies and commodities. This is not to be confused with the independent Banking Standards Board, chaired by Dame Colette Bowe, that emerged from Sir Richard Lambert’s separate review last year. Still with me? And have you spotted the difference between an authority, which descends from government, and a board, through which practitioners govern themselves?
Towards the end of Carney’s address, I found myself staring up at a stained-glass window of King John sealing Magna Carta — an example of rule-making on the hoof that failed to solve the problems of its day, even if its name became immortal. And I began to worry that what we were really being served was an enormous dish of regulatory spaghetti, prepared by too many cooks. I sensed foreign guests around me, conscious of London compliance costs, thinking that too; and one veteran banker, pausing on his way out, expressed sadness that the right way to behave should now have to be so tightly codified rather than instinctive. Wise commentators in the depths of the financial crisis (Tony Curzon Price here, for one) foresaw a day when labyrinthine rule-making would obliterate the last of laissez-faire: for better or worse, I think that day finally arrived last Wednesday.
Over the port, I asked a Portuguese banker about the much-talked-of risk of contagion from bankrupt Greece, what with elections due soon and Portugal’s anti-austerity Socialists polling (just) ahead of the ruling centre-right coalition. ‘We’re nothing like the Greeks these days,’ he said firmly. ‘Much more like Ireland.’ Though still heavily indebted, with a third of under-25s out of work, Portugal came out of its EU bailout last year and has returned to growth of around 1.7 per cent, underpinned by strong exports. The Economist said recently: ‘Portugal is now widely held up as proof that “austerity works”.’ As the special pleading from Athens goes on and on — with accusations this week of ‘pillaging’ by Greece’s creditors — that’s well worth remembering.
A name for the future
You might expect me, as a banking historian, to favour restoring the ‘Midland’ brand to HSBC’s soon-to-be-ringfenced UK branch network, especially as its HQ will be in Birmingham. The original Midland was founded in 1836 as the Birmingham and Midland Bank, with a board of local manufacturers, including one ‘steel truss and surgical instrument maker’. It emerged as the leader of British banking a century ago, and as the world’s largest bank by deposits in the 1930s. Its roots in industry made it better attuned to business customers than snootier London-based rivals.
But it fell behind them in the 1970s and ruined itself in the 1980s — chiefly by disastrous American adventures — and became a takeover target for everyone from Robert Maxwell to the Saatchi brothers, eventually to be rescued, brutally restructured and swallowed whole by HSBC. So why not revive it now, given that HSBC chairman Flint has already said Midland is ‘odds-on favourite’ to be the new name?
The answer is because HSBC owns a sexier brand in First Direct, the phone and online service that consistently ranks top for customer satisfaction — not only in banking but across all UK consumer sectors, coming first ahead of John Lewis in one survey last year. Founding First Direct 25 years ago was the last really smart thing Midland did before it sank; allowing First Direct’s managers to do it their own way was even smarter. A new bank that seamlessly combines the best of online and branch service really would be a breakthrough. Midland is history: First Direct is the future.