No sign of progress towards a workable deal with the EU for financial services, on which news is due next month. Bank of England Governor Andrew Bailey warned in unusually frank terms this week that although the UK has granted ‘equivalence’ to the EU in some financial activities, ‘the EU has not so far done likewise to the UK’ and seems unwilling to do so by reference to a ‘common framework of global standards’. Instead, Brussels is seeking to apply to the UK ‘a standard that the EU holds no other country to’, amounting to ‘rule-taking pure and simple’. Given the importance of financial services to the UK economy, that’s a major defeat of the Brexit principle which seems to be passing almost unnoticed.
Meanwhile, Amsterdam last month overtook London as Europe’s largest share-trading centre with average daily trades of €9.2 billion, up from €2.6 billion in December, while London’s volume halved to €8.6 billion. Some pundits have been quick to say that the loss of this low-margin business won’t dent City profits, but here’s another indicator: Amsterdam is celebrating ‘the largest ever European tech IPO’ — of InPost, the leading e-commerce enablement platform in Poland — while London’s current best boast is to have won the listing of Fix Price, a downmarket Russian discount retailer described in one report as ‘a bet on misery’. One way or another, the City is losing the battle with Europe and it’s high time for some government-level big guns.
A City comeback for Neil Woodford, the fallen-star investor whose £3 billion Equity Income fund collapsed in 2019 causing losses for many thousands of savers, looks as unlikely as, say, the appointment of Sir Philip Green to the Order of the Garter. But there he was (Woodford, that is, not Sir Phil) in the weekend press, tearfully admitting he was ‘very sorry for what I did wrong’ while continuing to blame the fund’s administrator, Link Fund Solutions, for closing it down when it could no longer meet redemptions while Woodford himself still thought he could manage it out of trouble — despite the illiquid, high-risk nature of many of its underlying investments.
He’s now talking about a new biotech fund venture but I wonder if his relaunch is really an exercise in defensive PR ahead of the publication, in a couple of weeks’ time, of Built on a Lie, the ‘inside story’ of Woodford’s rise and fall by FT journalist Owen Walker. I look forward to discovering whether it alters the judgment I passed here in October 2019, that ‘everything we continue to learn about [Woodford], his firm and his investment strategy makes a portrait of hubris personified’.
Whiff of disproportion
Tom Hayes, the former UBS and Citigroup trader who was convicted of fraud related to Libor interest-rate fixing, is out of prison, having served half of an 11-year sentence that was reduced on appeal from the original 14-year term imposed by Mr Justice Cooke at Southwark Crown Court in 2015. In the judge’s words, that sentence was ‘a message to the world of banking’. The Serious Fraud Office, which pursued multiple investigations into Libor and Euribor (euro rate) manipulation, declared ‘job done’ after securing convictions of eight more traders following Hayes — though with lighter sentences and outnumbered by acquittals — while regulators imposed fines on several major banks. But it’s not over for Hayes himself, who faces the possibility of another prosecution in the US and could yet see his case referred back to the Court of Appeal after re-examination by the Criminal Cases Review Commission.
Many people in the City felt the oddball Hayes, operating from Tokyo, was made a scapegoat for wider misbehaviour to which his own and other banks turned a blind eye. Among the peculiarities of his story is the fact that six money-brokers who were alleged to have been his co--conspirators were not called as witnesses in his trial but were themselves all later acquitted in a separate trial in the same courtroom. More fundamentally, some experts doubt whether the court really understood the nuances of the Libor rate-setting system, or the extent to which, as a relic of an earlier, simpler era of City trading, it was wide open to exploitation. No wonder its rules were completely rewritten after the scandal.
Hayes himself seems to have been aware of the dishonesty of influencing rate-settings in ways that profited his trading book, but to have believed both that his bosses knew and that it was habitual market practice. David Enrich’s book, The Spider Network (2017), offered the view that Hayes was not so much a criminal mastermind as a fly caught in a web of systemic cheating. His was the harshest punishment meted out to any British participant in the financial mayhem of the late 2000s: had many others gone down for similar stretches, he might not have won much sympathy. As it is, a whiff of disproportion hangs over his case; a group of House of Lords members has taken up his cause and the CCRC’s findings are eagerly awaited.
Towards the New World
At least freight traffic through Dover has returned to ‘90 per cent of normal’, according to the port authority. But here’s how my wine merchant says Brexit hits imports from France: ‘a potential 20 per cent increase in the cost of shipping, reflecting extra work for freight forwarders and inevitable lorry delays; increased duty as wines from the EU are now subject to Common Customs Tariff, plus further levies on duty deferment. Voluminous documentation best completed by an EU agent at additional cost. Oh, and heat-treated pallets, whatever they are, in compliance with international standards.’ Just as the City now needs to turn its face towards New York and Singapore (so says Jes Staley of Barclays), wine buffs had better start exploring the New World.