The Old Lady’s not for talking: what is the Bank of England not telling us?

http://www.theguardian.com/business/2015/mar/08/bank-of-england-old-lady-not-for-talking-sfo

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Maybe the Bank of England is still feeling its way. When the news broke last week that it faced its first investigation by the Serious Fraud Office, the Old Lady of Threadneedle Street was reticent. A brief statement from the governor Mark Carney. No details. Not even an outline of the case.

Almost immediately speculation started, and with it the sense that once again the public was being presented with piecemeal disclosure about allegations of wrongdoing during the financial crisis. Not only was the Bank giving the appearance of an institution with something to hide, but there was a forceful reminder that parliament has never commissioned an all-embracing investigation of what went wrong before and after the Lehman Brothers collapse, or how various institutions dealt with the fallout.

What we know about the latest incident is that the Bank sent a dossier to the SFO in November containing information about its bailout operations following the Northern Rock debacle. Banks were desperate for cash and wanted to exchange all kinds of assets for it. The Bank was a reluctant giver before the run on Northern Rock, only to throw open its doors afterwards to prevent a domino effect. Was this market in bank collateral open to abuse?

What we don’t know is who Lord Grabiner, the barrister in charge of the Bank investigation, has fingered. Was it one of the commercial banks that was potentially at fault? Bank staff or policymakers who monitored the liquidity operations? More generally, what we can piece together from the various books written about the financial crisis and the fragments unearthed by many incomplete investigations is that chaos reigned at the time and mistakes were legion.

Public officials and bank chief executives, keen to protect as much of their legacy as possible, have worked hard to give the appearance of openness while all the time shielding themselves from the spotlight.

Carney has made pledges on several occasions to increase transparency and turn an institution that relied on cosy “fireside chats” and nods and winks with high-street bank bosses into one that is widely admired for straight talking and scrutinising its own practices.

He defended the Grabiner report to MPs last week against accusations that it was diverted from looking into certain corners. Tory MP Jesse Norman, who commissioned his own legal opinion of the Grabiner remit, was unimpressed and clearly wanted a broader review for the £3m his lordship spent compiling it.

Less than a week before the Financial Times made the investigation public, Carney flagged 50 instances of potential market abuse. He said 42 had been referred to the Financial Conduct Authority, which was investigating “a number” of them.

Before this confession, the Bank was embroiled in probes over interest-rate fixing in the Libor scandal and the rigging of foreign exchange markets.

It may emerge innocent from all these examinations. But MPs are understandably frustrated at the drip-drip of accusations against the institution and the banking system, its bosses and traders, especially when the Bank is the regulator supreme – adopted by the current government as the main bastion protecting the public from market abuses in the future.

Carney should have realised that going public with the latest allegations, even though they date back to 2007-08, would have been better than having them winkled out by the media.

The reputation of the Bank is not determined by its past mistakes but on its determination to be open and tackle abuses. On this occasion what little information we have was dragged out of officialdom, not given freely. While the law must offer protection to people who have not been, and may never be, found guilty, public institutions should face a sterner test. And Carney should have taken the opportunity to maintain his reputation for transparency.

Browne bounces back into oil

Why would someone of Lord Browne’s status in business, politics and culture want to hitch his wagon to fossil fuels again, especially ones with a whiff of Russian scandal about them?

You might have thought that at 67 he would prefer to spend more time seeking pre-Columbian artefacts at auction to add to his collection, or just sit on the sofa of his designer Chelsea home. But no, he has ditched his involvement with the government as its most senior in-house business adviser, thrown aside his chairmanship of private equity group Riverstone, and become executive chairman of L1 Energy.

This is no ordinary oil and gas business but a highly ambitious and acquisitive start-up, backed by huge dollops of cash provided by Russian oligarchs including Mikhail Fridman.

L1 is already in the middle of completing the purchase for $7bn (£4.6bn) of the German-based Dea oil business from local utility RWE but has plans to expand quickly and decisively in North America and the far east. And with that acquisition it has stepped headlong into a bust-up with the UK government. Dea owns North Sea fields and Westminster fears that future sanctions by the west against the Kremlin could now hit production.

Fridman and his friends are anything but Kremlin cronies. They were not happy about being forced to sell their holding in TNK-BP to state-owned Rosneft but have taken the $14bn to start L1.

Browne is also busy as chairman of the Tate gallery and establishing his Glass Closet organisation which campaigns on gay and lesbian rights. You would not have thought he would risk getting caught in an east-west political row. He is not talking yet, but friends say that he cannot resist an opportunity to create something new and dynamic. The man who pioneered “beyond petroleum” when he was at BP had been expected to at least go low-carbon.

Perhaps his ultimate aim is to take over his old firm. They have already joined forces on a $12bn natural gas venture in Egypt. BP is subject to endless merger rumours with Shell or ExxonMobil. Why not L1? It could even be renamed Browne Petroleum.

Plenty of restraint at IAG

The sight of bosses pocketing fantastical sums while demanding employees tighten their belts has become so familiar as to almost pass unnoticed. However, one might hope it is noticed by the people whose job is – theoretically – to monitor their pay. IAG’s Willie Walsh got £6.4m in 2014 as British Airways’ sister airline Iberia turned a profit after throwing a few thousand workers on to Spain’s burgeoning scrapheap. Baroness Kingsmill, dishing out the bread as chair of IAG’s remuneration committee, noted of his 30% pay rise: “Once again, the chief executive of IAG has continued to lead by example in proposing restraint in executive packages.”

Funnily enough, Kingsmill used exactly the same words in 2013’s annual report, when Walsh’s pay rocketed from £1m to £5m. Kingsmill herself nets £162,000 a year from her part-time IAG job, as well as holding down similar jobs on three energy and telecoms boards. She is a Labour peer. Can she do better than cut and paste?