Business Comment: Terry Murden
Davies risks reviving the ghosts of banking past
First of all, it’s disappointing that Sir Howard Davies’ appointment as the next chairman of the Royal Bank of Scotland means another executive of the “Scottish” bank will be based in London. The days of finding someone groomed locally seem to be well and truly over. Expect a collective groan from the Scottish advisory community who will see more RBS work dished out among London’s legal and accounting fraternity.
More surprising is that the government, keen to distance itself from the errors of Britain’s financial crisis, has appointed the man who set up and chaired the discredited Financial Services Authority and which was subsequently accused of being “asleep at the wheel” as the banks approached meltdown.
Sir Howard has always distanced himself from any responsibility, arguing that he left the FSA in 2003, some four years before the problems in the banks erupted. Critics, who will no doubt be relishing an opportunity to accuse the government of double standards, will point out that the banking crisis did not develop overnight.
What is not in dispute is that the coalition was keen to disband the FSA and replace it with the Financial Conduct Authority as part of the slate-cleaning programme supposedly designed to exorcise the ghosts of banking past.
Now we have the reappearance of Sir Howard, not as a horrible apparition, but made flesh: the former gatekeeper for a sector that careered out of control and who is now expected complete the bank’s rehabilitation as a reformed institution. His appointment is in keeping with the desire of the City circle to make sure no one from outside its boundaries gets above themselves. Keeping it “local” keeps it within the usual rules of membership. Unfortunately, it also represents a lack of ambition at a time when banking needs new blood and new thinking. A female chairman – which I advocated last year – would have gone some way to achieving that outcome and would have won Chancellor George Osborne some credit.
However, Mr Osborne’s ambition begins and ends with getting RBS back into private hands and he has found someone who at least knows his way around the corridors of the investment banks and other institutions whose support will be vital.
Sir Howard will replace the outgoing Sir Philip Hampton whose tenure was somewhat coloured by his inability to tame Fred Goodwin’s replacement Stephen Hester (fired for not following Treasury orders) and who claimed a little prematurely that RBS was ready to be returned to the private sector as soon as the government gave the go ahead.
Sir Howard, 64, is currently chairman of insurance group Phoenix and a non-executive director of Morgan Stanley. His career has certainly been interesting. He resigned as a director of the London School of Economics over concerns about the university’s decision to accept funding from Colonel Gaddafi’s son, Saif, in 2011.
In recent months he has been leading the inquiry into the options for additional runway capacity in London and is expected to submit his final report soon.