Brydon should just go now
STRIP away the legalese in the London Stock exchange circular ahead of the December 19 general meeting and we learn that, after nearly a decade at the top, the board no longer liked Xavier Rolet’s ‘operating style’ and wanted him out.
It tried to sugar coat his planned departure as ‘retirement’, but Rolet refused to play ball.
The intervention by 5pc investor Sir Christopher hohn unsettled the board, and the Bank of england made it plain that it could not allow an unseemly succession squabble to continue. Rolet was forced out, never to darken the LSe’s doors again.
The weak response of the board to these events is to describe them as ‘regrettable’. This is a word used when people refuse to say sorry. The board is also choosing to stand full square behind chairman Donald Brydon.
At the meeting, LSe shareholders holding more than 50pc of its stock would need to vote against Brydon if he is to be sacked. The case for a fresh start is overwhelming.
Brydon was a leading advocate of the disastrous merger proposal with Deutsche Boerse. he allowed Rolet to be moved on to save his own skin as chairman. he is also responsible for a disorderly succession which has made the LSe a source of ridicule and might threaten financial stability.
It could potentially also leave the LSe vulnerable to an American takeover, damaging the UK’s dominance of the valuable interest rate swaps market.
Brydon should go now rather than expose the LSe to weeks, if not a year or more, of instability. As the LSe’s circular makes clear, there is no shortage of talented candidates to replace Brydon, either temporarily or permanently, among the nonexecutives.
Banking leftovers
The embers of the banking crisis still burn bright. In the high Court, a succession of Lloyds Bank former bigwigs have testified to their limited knowledge of the nasties at hBOS at the time of the shotgun wedding in October 2008.
In a report to the house of Commons, the audit watchdog, the Financial Reporting Council, acknowledges it was deficient in its probe into the hBOS audit by accountants KPMG.
Meanwhile, Lloyds Bank finally has coughed up compensation to Paul and Nikki Turner, who lost their home and livelihood in a tenyear battle which exposed fraud at the hBOS Reading branch.
Over at Royal Bank of Scotland, a memorandum has gone out disclosing that the ‘bad bank’ finally is being closed down with a £50bn operating loss. Clients of its vulturelike Global Restructuring Group are still fighting for decent compensation.
even now, a decade on from the financial crisis, the Bank of england disclosed this week that RBS and Barclays only just squeezed through the latest stress tests. Former deputy governor Paul Tucker noted yesterday that some (unnamed) banks may still not have enough equity capital to safely see them through any future disruption to the global economy.
The public and future generations deserve nothing less than the full accounting through a judicial inquiry, as called for by economic historian David Kynaston (see page 89). It is never too late.
Labour’s love lost
The sense of dread in the City about a Corbyn-McDonnell-led Labour government is reaching crisis proportions.
Labour will find it hard to resist turning governor Mark Carney’s advocacy of a return to bonuses as an excuse to lash out about greed.
The EU’S cap on bonuses has been distorting and destructive.
Most banks have been forced to raise basic pay, which increases fixed costs. It also means that the capacity to claw back bonuses when things go wrong is also lost.
Finally, it puts London as a financial centre at a competitive disadvantage to New York.
Attacking the bankers is easy meat for Labour. But it is also worth noting that the bubble in the City occurred on Labour’s watch – and it was then chancellor Gordon Brown who opened Lehman Brothers’ flash headquarters at Canary Wharf.
Labour has to be wary of killing the goose that is once again laying golden eggs.
The tax contribution of the financial sector in the year to March 2017 reached a record £72.1bn.
Moreover, the services surplus on foreign trade stands at £92bn.
Alienating the City could prove as damaging as Churchill’s disastrous return to the gold standard in 1925.