Comment: New regulation system will need some tough operators

By TERRY MURDEN
Published on 19/08/2012 00:00

HE WAS once the Diamond Geezer who reigned supreme over one of the world’s biggest institutions. These days Libor Bob is a tarnished jewel in a badly bruised banking sector that is in desperate need of some restorative work.

A scathing report on the Libor scandal by the over-worked Treasury Select Committee has done nothing to bring a shine to the reputation of Bob Diamond, who is now sharing a cell of shame with the likes of former RBS chief Fred Goodwin.

Diamond denied many of the charges laid against him in last week’s report, including allegations of his being selective in his evidence to the committee, and while he has become the public face of the scandal he is by no means its only culprit.

The report highlighted weaknesses in the regulatory system, hardly a revelation in light of all that has happened since 2008, but nonetheless adding to the in-tray of those who will be tasked with building the successor regime. The authorities promise a different, more judgmental approach so that regulators will be more hands-on in telling banks what needs to be done when they don’t like what they see.

In a touch-sensitive environment in which the main players are driven by ambition, ego and the potential for huge rewards it will require strong personalities to tell them they are wrong and that they must make changes.

But if regulation is to work it must be rigorously applied and the evidence, to which last week’s report adds further proof, indicates that the UK has lagged behind its US counterparts both in early detection and in enforcement action. The Financial Services Authority’s functions will be split up and regulation shared among a number of organisations. This should give each one a greater 
focus on specific areas of supervision. The worry is that it will allow them to blame each other when the next crisis occurs.

More change ahead for Martin Currie

A BOARDROOM reshuffle at Martin Currie and the appointment of Rich deMartini as co-chairman alongside David Shearer ends another week of upheaval at the Edinburgh fund manager which has had a troubled few years. There could be more change to come.

Funds under management have slumped significantly, from almost £16 billion to £4.4bn in five years, and it is still nursing wounds over its handling of a China fund that led to it being fined by the UK and US authorities.

The company insists it has a plan to rebuild after securing new financing support in May. But employee ownership, a big selling point, has tumbled to around 40 per cent and the value of their holdings was diluted by the issue of new shares.

The bigger part of the business is now owned by Crestview Partners, the Rothschilds and RBS, which is understood to have a 5 per cent stake. I hear that future financing rests on funds under management picking up smartly.

For all the talk about rebuilding, word in the market is that the business might be seeking a buyer.

It’s good to talk, Tesco Bank

THE refusal of Tesco Bank to comment on Shaun Doherty’s position highlights once again the failure of communication that does the financial services industry no favours.

He holds a senior position at the company which was happy enough to trumpet his arrival. So much for transparency.