Plague on both houses
Andrew Bailey lacks powers directly to block the shabby takeover by non- Standard Finance (NSF) of doorstep lender Provident Financial.
But, as chief executive of the Financial Conduct Authority (FCA), he occupies what the Americans call a ‘bully pulpit’. So his warning that the FCA will not tolerate any reversion to the practices of the past has to be taken seriously.
The boss of NSF, John van Kuffeler, argues that in its previous 22-year incarnation, Provident had no serious regulatory issues. This does not stand up to scrutiny because of the revolution that has swept through the sub-prime lending sector since then.
The ultra-usurious interest rates paid by Provvy customers when van Kuffeler was still at the helm have been outlawed.
It was the supercharged returns at the expense of the poor which enabled him to hang on to his job for so long.
Van Kuffeler likes to make the case that his know-the-customer style doorstep lending was the equivalent of a benevolent society. It was barely disguised extortion.
To Bailey’s credit he has come down hard on payday lenders and those who have become rich at the expense of the most vulnerable customers in the land. It is hard to see how merging NSF with Provident in a financially driven transaction, which is all about taking out costs, can possibly be of any benefit to Provident’s 2.5m, or NSF’S 180,000, customers.
The big investors cannot escape censure for this. The support of Mark Barnett of Invesco and his former colleague neil woodford of his eponymous funds, has been critical to the NSF assault.
This is hardly the kind of ethical behaviour now expected of fund managers but a manifest effort to try to salvage some value having made a very bad investment.
Provident Financial rightly has been through the regulatory mill. Its core business, Vanquis, was required to pay £170m in compensation to customers for mis-selling. The car finance arm, Moneybarn, is still under the close watch of regulators and its ‘interim’ chief executive Malcolm Le May, with his patrician City background, is not the right person to be heading an organisation dealing with some of the most financially stressed people in society.
But the last thing the customers of Provident and, for that matter, NSF need is a management team that has proven reckless in the payment of dividends from reserves and put their own self-aggrandisement above the care of borrowers.
Bailey may be unable to stop the juggernaut. But a deeper stage two investigation by the Competition and Markets Authority (CMA) and a revolt by minority investors could end this disgraceful transaction.
Bean counting
REFORM of financial regulation historically is painfully slow. It is a measure of how trust in auditors has deteriorated that reforms proposed by Sir John Kingman’s probe, and now by the CMA, have been fast-tracked.
High-profile audit failure from Carillion to Patisserie Valerie, not to mention Tesco and the Co- op bank, illustrated the need for change. The CMA’s idea of injecting more competition into the market by encouraging ‘challenger’ firms to work alongside the Big Four looks sensible. whether or not the challengers will ever have the reach, systems and wherewithal to audit some of the global FTSE 100 firms is more doubtful.
But the CMA and its chairman Andrew Tyrie have erred in stopping short of full separation of the big audit firms from their consulting arms. The pretence of Chinese walls between the two functions simply by producing separate accounts and boards does not cut the mustard.
There is no reason why the consulting firms couldn’t be floated off as separate entities as was the case for Accenture, the former consulting arm of failed auditor Arthur Andersen.
Part-separation does not offer the assurance of independence that stakeholders need. It is as if Premier League referees could be trusted if they worked under the same roof as Bet 365.
The Government, if it can ever function again, should legislate for total separation.
Gin palaces
THAT most French of spirits groups, Pernod ricard, is finding it hard to resist the allure of that most British of tipples – gin.
In its latest effort to gain a foothold it has snapped up Italian gin distiller Malfy which uses local juniper, coastal-grown lemons and Sicilian blood oranges. old-fashioned gin and orange all in one bottle.