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You can find the current article at its original source at https://www.theguardian.com/business/nils-pratley-on-finance/2017/jul/18/hbos-failure-fca-safestore
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| HBOS inquiry: the time for delays is over | HBOS inquiry: the time for delays is over |
| (about 1 month later) | |
| It is now almost nine years since HBOS failed but, if you thought our City regulators couldn’t possibly spin out their inquiries any longer, you’d be wrong. | It is now almost nine years since HBOS failed but, if you thought our City regulators couldn’t possibly spin out their inquiries any longer, you’d be wrong. |
| The next instalment – the one that will determine whether former top directors and managers of HBOS should be banned from working in the City – will be completed “as soon as possible,” said Andrew Bailey, head of the Financial Conduct Authority, on Tuesday. In regulator-speak, that means it’s time to re-set your watch. “I can’t put a date on it,” confirmed Bailey. | The next instalment – the one that will determine whether former top directors and managers of HBOS should be banned from working in the City – will be completed “as soon as possible,” said Andrew Bailey, head of the Financial Conduct Authority, on Tuesday. In regulator-speak, that means it’s time to re-set your watch. “I can’t put a date on it,” confirmed Bailey. |
| To be fair to him, he can’t be blamed for the delay in conducting the official inquiry, which finally landed in November 2015. Indeed, as head of the Prudential Regulation Authority at the time, he was one of the authors of the damming 400-page report that declared that “ultimate responsibility for the failure of HBOS rests with its board”. | To be fair to him, he can’t be blamed for the delay in conducting the official inquiry, which finally landed in November 2015. Indeed, as head of the Prudential Regulation Authority at the time, he was one of the authors of the damming 400-page report that declared that “ultimate responsibility for the failure of HBOS rests with its board”. |
| That same report, however, left the question of sanctions against individuals in the air. Thus the FCA set out in January 2016 to determine whether executives such as former chairman Lord Stevenson and former chief executives James Crosby and Andy Hornby were personally “culpable”, which was the regulatory standard at the time for enforcement action. | That same report, however, left the question of sanctions against individuals in the air. Thus the FCA set out in January 2016 to determine whether executives such as former chairman Lord Stevenson and former chief executives James Crosby and Andy Hornby were personally “culpable”, which was the regulatory standard at the time for enforcement action. |
| Some 18 months later, we (and the individuals) are still waiting for conclusions. The delay this time, explained Bailey, is a complication in the form of the FCA’s separate HBOS inquiry arising from the fraud at the HBOS Reading branch for which six people were jailed in February. The Reading evidence will “inform” the main inquiry. | Some 18 months later, we (and the individuals) are still waiting for conclusions. The delay this time, explained Bailey, is a complication in the form of the FCA’s separate HBOS inquiry arising from the fraud at the HBOS Reading branch for which six people were jailed in February. The Reading evidence will “inform” the main inquiry. |
| Well, yes, we can all agree that it’s best to gather all the facts and do a thorough job. But, come on, a sense of urgency is required. HBOS’s ill-judged lending spree led to £45bn of bad loans and the bank’s failure was as bad as Royal Bank of Scotland’s. Nine years, and counting, is too long to wait to learn if the top brass should be barred from the City. Hurry up. | Well, yes, we can all agree that it’s best to gather all the facts and do a thorough job. But, come on, a sense of urgency is required. HBOS’s ill-judged lending spree led to £45bn of bad loans and the bank’s failure was as bad as Royal Bank of Scotland’s. Nine years, and counting, is too long to wait to learn if the top brass should be barred from the City. Hurry up. |
| Safestore’s pay plan is far from defensible | Safestore’s pay plan is far from defensible |
| City fund managers tell us they will get tough with companies that propose over-the-top incentive schemes for executives. Now they have a chance to prove it. | City fund managers tell us they will get tough with companies that propose over-the-top incentive schemes for executives. Now they have a chance to prove it. |
| Safestore, a FTSE 250 company that offers storage space, withdrew its original proposal in March because rewards for individuals were judged too generous and performance targets too soft. | Safestore, a FTSE 250 company that offers storage space, withdrew its original proposal in March because rewards for individuals were judged too generous and performance targets too soft. |
| Now comes the revised version, which is supposedly a compromise but looks nothing of the sort. The number of shares on offer to the executives has been cut by a fifth but Frederic Vecchioli, the chief executive, would still be able to bag £8.4m-worth at the current share price if he hits his targets over the next five years. | Now comes the revised version, which is supposedly a compromise but looks nothing of the sort. The number of shares on offer to the executives has been cut by a fifth but Frederic Vecchioli, the chief executive, would still be able to bag £8.4m-worth at the current share price if he hits his targets over the next five years. |
| To put that in context, it’s about 1% of entire company. Throw in the cut for finance director Andy Jones and 35 other managers, and Safestore is proposing that up to 3.25% of the company’s shares could be handed to management as a reward. That’s £28.6m-worth at today’s price, which is extraordinary. This is a public company, not a private equity adventure. Nor is it a giant multinational like Shell. It’s a UK storage business. | To put that in context, it’s about 1% of entire company. Throw in the cut for finance director Andy Jones and 35 other managers, and Safestore is proposing that up to 3.25% of the company’s shares could be handed to management as a reward. That’s £28.6m-worth at today’s price, which is extraordinary. This is a public company, not a private equity adventure. Nor is it a giant multinational like Shell. It’s a UK storage business. |
| The Safestore chairman, Alan Lewis, argues the scheme is good for shareholders but concedes that “the current backdrop around executive remuneration and public sentiment is not conducive to such change.” Actually, that’s not the real problem. It’s just a greedy scheme. Or, as proxy voting agency ISS puts it, “the underlying rationale remains not particularly compelling.” | The Safestore chairman, Alan Lewis, argues the scheme is good for shareholders but concedes that “the current backdrop around executive remuneration and public sentiment is not conducive to such change.” Actually, that’s not the real problem. It’s just a greedy scheme. Or, as proxy voting agency ISS puts it, “the underlying rationale remains not particularly compelling.” |
| The Investment Association has issued a “red top” warning signalling its concerns. Its fund managers should know what to do next week: vote against, and tell Safestore to return with a plan that belongs in the real world. | The Investment Association has issued a “red top” warning signalling its concerns. Its fund managers should know what to do next week: vote against, and tell Safestore to return with a plan that belongs in the real world. |
| Bank should have been open to persuasion on £10 note | Bank should have been open to persuasion on £10 note |
| The Bank of England has flunked it. Financial themes run through Jane Austen’s novels but Threadneedle Street has avoided a money-related quotation on the back of the new £10 note. It has opted for the well-known but dull: “I declare after all there is no enjoyment like reading.” As some have pointed out, the choice feels wrong because Caroline Bingley in Pride and Prejudice doesn’t believe what she’s saying and is just trying to impress Mr Darcy. | The Bank of England has flunked it. Financial themes run through Jane Austen’s novels but Threadneedle Street has avoided a money-related quotation on the back of the new £10 note. It has opted for the well-known but dull: “I declare after all there is no enjoyment like reading.” As some have pointed out, the choice feels wrong because Caroline Bingley in Pride and Prejudice doesn’t believe what she’s saying and is just trying to impress Mr Darcy. |
| What would have a better choice? In light of governor Mark Carney’s warnings about the dangers created by the UK’s “lost decade” and the lack of growth in incomes, try this from the selfish Mary Crawford in Mansfield Park: “A large income is the best recipe for happiness I ever heard of.” Provocative? Maybe. But surely perfect for a banknote. | What would have a better choice? In light of governor Mark Carney’s warnings about the dangers created by the UK’s “lost decade” and the lack of growth in incomes, try this from the selfish Mary Crawford in Mansfield Park: “A large income is the best recipe for happiness I ever heard of.” Provocative? Maybe. But surely perfect for a banknote. |
| HBOS | HBOS |
| Nils Pratley on finance | Nils Pratley on finance |
| Bank of England | Bank of England |
| Mark Carney | Mark Carney |
| Financial Conduct Authority | Financial Conduct Authority |
| Banking | Banking |
| Regulators | Regulators |
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