Mark Kleinman: Reeves revels in ring-fencing reform

Mark Kleinman is Sky News’ City Editor and the man who gets the Square Mile talking in his City AM column

Reeves revels in ring-fencing reform

Is Rachel Reeves about to rip up ring-fencing? It was a question I posed in this column just over a year ago. Now, we have an answer of sorts. The Chancellor’s announcement last week that the post-crisis reforms conceived by Sir John Vickers’ Independent Commission on Banking would, indeed, be scaled back was warmly received by a banking industry which continues to believe it is excessively regulated against its American peers.

The headlines, which I revealed a couple of days ahead of the Treasury’s announcement, look broadly sensible: permitting lending to government institutions such as the National Wealth Fund and British Business Bank from within their ring-fenced arms, allowing more hedging activities to take place to bring down funding costs, and giving the green light to the sharing of services between ring-fenced and non-ring-fenced lenders.

S&P, the ratings agency, described it as representing “a targeted easing of the framework rather than a material rollback” of the ring-fencing regime; while Mahesh Aditya, the new chief executive of Santander UK, said the Treasury’s move would “ultimately benefit the customers and businesses that need support most, while also encouraging additional inward investment into the UK”.

Certainly, it was the least ill-conceived of the policy decisions emanating from the Treasury over the last fortnight. A food price cap, roundly decried by the UK’s major supermarkets, was a moment when the mask truly slipped. By contrast, bank chiefs were – Barclays aside – breathing a sigh of relief at the revised ring-fencing rules.

The Treasury hailed the overhaul as paving the way for an £80bn lending boost across those subject to ring-fencing: Barclays, HSBC, Lloyds Banking Group, NatWest and Santander UK.
But might this not turn out to be yet another hyperbolic claim from an already-desperate administration? Bankers say there’s scant evidence that there will be customer demand for the additional lending capacity that their balance sheets might gain over time from the changes.

That’s because an anaemic economy with little regulatory visibility is forcing an increasingly cautious outlook on lenders. Even when a form of victory beckons, Labour seems to be adept at snatching defeat from its jaws.

BP is now Beyond Parody

Beyond Parody: that’s the only way to describe the jaw-dropping moment on Tuesday when BP announced that Albert Manifold, its chairman for barely seven months, was being forced out.
BP’s statement was legalistic and ambiguous. It cited concerns about governance, oversight and conduct, immediately igniting the kind of rumour mill on which the oil company has featured all too often in the last five years.

In the end, it appears that the facts, as BP’s board saw them, were that a domineering and bullying figure could not be allowed to become so entrenched in its boardroom as to make him unsackable.
Yesterday, Manifold hit back, saying he had been “removed without warning and without explanation” and that he had “worked to drive genuine change at BP – cutting costs, challenging excess, and holding the organisation to higher standards”.

“I dispute entirely the characterisation of my conduct and I will not allow a false narrative to go unchallenged.”

As I revealed on Sky News yesterday, Manifold’s appointment of Mishcon de Reya to represent him suggests this last statement might be a euphemism for a rather more pugilistic approach. In fairness to the former CRH chief, he was brought in to BP precisely to drive faster and more radical change across a company which had badly lost its way – it appears to be the manner of his doing so which triggered his downfall.

Nevertheless, as yet another search gets underway for a top post at BP, serious questions need to be asked of other board members too – notably the senior independent director, Dame Amanda Blanc. More transparency is needed if BP is going to restore investors’ faith all over again.

Glen bemoans Treasury’s revolving door for City ministers

Eleven in ten years: no, not Chelsea head coaches or Aston Martin profit warnings – the number of economic secretaries to the Treasury.

Step forward, the latest incumbent, Rachel Blake, who might as well not bother putting any family photos on her desk, such is the speed of the Treasury’s revolving door.

Flippancy aside, the continued lack of continuity in the City minister post is a major issue for a financial services sector in a state of competitive and regulatory flux. For John Glen, whose four-and-a-half year tenure in the post made him, by comparison, the Sir Alex Ferguson of City ministers, the trend is a disturbing one.

“In my 54 months as Economic Secretary to HMT a fundamental aspect of the job was establishing regular communication with CEOs and stakeholders who represent this critical UK industry and building strong relationships with regulators to help deliver change,” he told me this week.

“It is very unfortunate that in the 46 months since I resigned in July 2022, the average tenure of my seven successors is just over six months in office.

“I am not criticising any of them individually but I hope the latest, Rachel Blake, will last until the next election so she has the chance to move forward the reforms the industry is so eager to see.”
You won’t find many who argue with that.