Comment: Keep eyes on gamekeepers turned poachers

Gareth Mackie
Gareth Mackie
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ROYAL Bank of Scotland chief executive Stephen Hester is keen to turn the state-backed lender into a “really good bank”, and is taking steps towards the group’s redemption by lining up former Financial Services Authority (FSA) director Jon Pain to oversee its conduct.

In doing so, he is following in the footsteps of Barclays, which appointed ex-FSA chief executive Sir Hector Sants at the start of the year as its head of compliance. Meanwhile, Lloyds is preparing to welcome the Central Bank of Ireland’s outgoing deputy governor, Matthew Elderfield, into a similar role in October.

As these gamekeepers take up their new roles with the poachers, they will come under intense scrutiny to make sure the scandals of the past are not repeated. Both Barclays and RBS were slapped with massive fines for their part in the Libor-rigging scandal, which happened under the watchful eye of the now-defunct FSA.

Treasury committee chairman Andrew Tyrie recently said an FSA report into the chain of events that precipitated RBS’s government bail-out “laid bare serious failures” at both the bank and the regulator, which admitted it had failed to monitor and challenge the group adequately.

Martin Wheatley – head of the new Financial Conduct Authority – has pledged to clean up the sector with new powers to suspend or ban products and issue fines. With banks’ reputations in tatters and Lloyds and RBS keen to return to private ownership, their efforts to get their houses in order should be applauded.

But they must act on their promises, and weed out the cultures that led to the Libor affair and rampant mis-selling of inappropriate products, before we can decide whether they have become really good again.

Booker faces a tough job at the Co-op Bank

Niall Booker, the former head of North American operations at HSBC, will have a long “to do” list when he arrives for work as the Co-operative Bank’s new chief executive on 10 June.

Top of the agenda will be persuading regulators that the mutual bank is tackling its capital shortfall, which some analysts say could be as high as £1.8 billion. He will also have to find a buyer for the firm’s general insurance arm, which it put up for sale after agreeing to offload its fund management and life insurance businesses to Royal London for £219 million.

Then there is the matter of rebuilding the bank’s credit rating, which Moody’s slashed to junk status because of costs linked to the Co-op’s takeover of Britannia Building Society in 2009.

Booker fills the seat vacated by Barry Tootell, whose departure earlier this month followed the Moody’s downgrade and the collapse of a £750m deal to buy more than 630 branches from Lloyds.

He has acknowledged that there are no “quick fixes” in turning the business around, but he will need a steady hand if he is to make sure the Co-op can weather the storm.