Courting Hampton’s successor

IN HAPPIER days, the impending exit of a big four bank chairman would have had City panjandrums shouldering their way into prime position, like bridesmaids in a scrum for the bouquet.

After the financial crisis, however, chairing a bank – and in particular RBS – looks less like an enticing way to round off a career and more like a poisoned chalice.

The departure of Sir Philip Hampton for Glaxo makes RBS the third bank to change its chairman in recent months.

He will not be easy to replace. A couple of good candidates have al r eady been t aken: lloyds appointed lord Blackwell late last year, and Barclays earlier this month nabbed the highly regarded John McFarlane.

The latter would have been a great catch, but it was not to be.

So who might take the chair from Hampton? Alex Salmond, who championed Fred Goodwin’s disastrous takeover of ABN Amro, may be looking for a fresh start – but don’t write in: I’m kidding.

Sir Gerry Grimstone would be an excellent choice. Despite sounding like a character from our Mutual Friend, he was Margaret Thatcher’s privatisation guru and is the chairman of Standard life.

Whether he would be favoured by Sir Sandy Crombie, the RBS nonexecutive leading the search process, is an interesting question.

Grimstone was in the chair at Standard life when Crombie left his role as chief executive. Crombie might want the job for himself.

one can be sure that far more energy will be expended on finding the right man or woman than in the past.

Earlier bank chairmen were illqualified to the point of farce, such as the ignoramus Crystal Methodist Paul Flowers at Co-op, mental health activist lord Stevenson at HBOS and scientist Matt Ridley at Northern Rock. The pool of credible bank chairmen that remains is a small and incestuous one. Its ranks have been depleted by the financial crisis, which has laid waste to a generation of financiers.

Hampton has done a solid job – unlike his predecessor Sir Tom McKillop, who made the journey from banking to pharmaceuticals in reverse. His bagging of the top job at GSK should at least reassure potential candidates that there is life after RBS.

Sleeping giants

A SPEECH by Mark Carney to actuaries at an insurance conference in Wales sounds like a guaranteed snoozer.

But the governor has delivered an alert as to how important the insurance and pension fund sector is to the economy and the financial system. At the moment, it is half the size of the banking industry, but is growing fast as the banks are shrinking.

For all the relative neglect of the industry, insurers and pension companies can wreak a great deal of havoc, as did AIG in the financial crisis or Equitable life before the meltdown.

The Bank’s proposals to make directors and managers of insurance companies accountable, and to crack down on firms using dodgy models to reduce their capital buffers, make perfect sense.

But there are more positive aspects to the sector that the Bank could do more to explore. Insurers and pension funds could play a valuable role in stabilising the financial system, as they should be taking on long-term investments.

Unlike banks, the nature of their business means they are not vulnerable to sudden ‘runs’ as they do not have depositors who can pull out funds on demand.

For a variety of reasons, however, they may have been behaving in ways that amplify risks, rather than smoothing them out.

legislation has prompted pension funds to embark on a big shift into gilts when, arguably, investing i n equities and i nfrastructure projects would deliver better returns for investors and be of more service to the economy.

Diving into gilts drives down yields, which depresses rates used to work out pension deficits and leaves funds with bigger shortfalls.

Pension funds and insurance companies are sitting on billions of pounds of savers’ cash, but this money is not being deployed to maximum benefit.

The Bank of England should look at how these sleeping giants could awaken the power of their balance sheets.

Small world

HOW interesting that Tesco’s company secretary, Jonathan lloyd, used to work at Freshfields, the law firm that is investigating the supermarket’s enormous overstatement of profits.

Tesco says there is no conflict of interest, because lloyd, who left Freshfields in 2005, has no role in the investigation.

The supermarket group also argues that Freshfields is acting as its long-standing adviser, and that it has had no previous relationship with the accountancy firm Deloitte, which is probing the inflated profit figures.

Even so, it’s a small world.