Andrew Bailey, taking a day off from quarrelling with Dame Elizabeth Gloster over London Capital & Finance, gave a long list of reasons on Wednesday for why, in a rational world, it would be straightforward for the UK and the European Union to cooperate on financial services. This is important territory. Arrangements on financial services, which were excluded from last December’s Brexit trade deal, could dictate the future of the City for a decade.
First, said the Bank of England governor in his speech at Mansion House, regional disagreements don’t make sense in a financial world that increasingly runs on global rules overseen by global bodies. Second, the UK’s standards already look more equivalent to the EU’s than those of Canada, the US, Australia, Hong Kong and Brazil, countries that have been awarded “equivalence” gold stars by Brussels.
Third, it’s nonsense to expect equivalent to mean identical. The UK’s rules must govern a financial system 10 times the size of UK GDP, so local differences are to be expected – indeed, are essential. Fourth, the UK isn’t interested in creating “a low regulation, high risk, anything goes” financial system, so the EU shouldn’t worry about importing instability.
They’re all fine arguments and Brussels clearly implicitly accepts a few. Temporary equivalence was granted last year in some areas for reasons of financial safety. If a deal – or even the memorandum of understanding due next month – was solely in the hands of financial technocrats, the temporary might become permanent.
The problem, of course, is that politicians will decide. The big unknown is the EU’s appetite for cutting the City down to size, which is mostly about the ambitions of Paris, Frankfurt and Amsterdam. Bailey’s logic was impeccable. But, if the EU wants to insist that euro-denominated financial deals are cleared within the eurozone, that is now its call.
No, a £40m CEO bonus isn’t OK
Now we know: a £40m bonus for the chief executive of a FTSE 250 company is fine, or so most big shareholders in Future, the publishing house behind PC Gamer, Real Homes and Horse & Hound, believe. The contentious proposal to crank up potential rewards met a 36% rebellion, but a majority is a majority. Future’s plea that it is a special case worked.
The company’s argument was that Zillah Byng-Thorne, the chief executive who will receive the splendid sum if five-year targets are achieved, has already overseen Future’s transformation from stock market straggler to £2bn operation. The company also congratulated itself that the rest of workforce, unusually, will be offered mini-jackpots.
Fine, but almost every company can plead its position is exceptional in some way. The Restaurant Group, owner of Wagamama, thought its executives needed new incentives after the trading whack from lockdowns. At Cineworld, the cinema chain, it was a case of a show of force: the two brothers in charge were backed by a 20% family holding.
Future’s proposal is less objectionable in the sense that the company is not starting with a battered share price, as conceded here last week. But Byng-Thorne’s package still equates to £8m a year at the maximum, a sum one used only to associate with companies halfway up the FTSE 100 ladder. This is boardroom pay inflation in action. And the timing – in the middle of an income-destroying (for some) pandemic – looks terrible.
At least Chuka Umunna isn’t still an MP now he’s a banker
Chuka Umunna will lead JP Morgan’s environmental, social and governance work in Europe, which sounds like a proper job, as opposed to the advisory gigs the Wall Street bank has handed out to Sajid Javid and Tony Blair. All the same, the appointment represents yet another trip down the well-travelled road between Westminster and the City. The regularity of such journeys feels unhealthy.
Banking is a political business. A decade ago, the state was bailing out banks and introducing regulatory reforms. Soon the issue will be how hard lenders should chase the repayment of Covid loans – those underwritten by taxpayers and those where the banks are on the hook. In an ideal world, there’d be an unbridgeable career gap between lawmakers and banks.
In practice, it’s probably impossible to place limits on where former politicians can work once they’ve left Westminster – and, at the age of 42, Umunna has to do something. Rather, the appointment that should have created a stink is Javid’s, since the former chancellor is still an MP. That arrangement ought to be strictly off-limits.