The man who described some banking as socially useless gets a new job – with a bank.
It is not unfair to say that Lord Adair Turner has not always been a friend to banks. Turner was a non-executive director at Standard Chartered in the boom years before the crash, and an executive at Merrill Lynch before that.
But he turned gamekeeper in the crisis to head the Financial Services Authority. In that role, Turner well and truly put the boot into the industry.
“Some financial activities which proliferated over the last 10 years were ‘socially useless’, and some parts of the system were swollen beyond their optimal size,” he said in 2009, in perhaps his most famous speech.
“There are good reasons for believing that the financial industry, more than any other sector of the economy, has an ability to generate unnecessary demand for its own services.”
One could have been forgiven for assuming that was the end of his time in banking. Not so, though.
Yesterday, Lord Turner announced his return to the sector, admitting to City A.M. that he surprised even himself by taking a place on the board of the newly established OakNorth Bank.
“In the course of last year, a number of newly started banks, the challengers and peer-to-peer lending platforms came to me. I’d not actually thought about doing one of the new entrant things,” Turner said.
“But several came along with interesting developments in the market, and I ended up taking them seriously.”
In the end, he settled on this bank because it focuses on lending to growing small businesses, and does not focus on property-backed lending.
And what about that famous quote?
“I hope this will be a socially useful bank,” Turner chuckles.
“This is a bank which will succeed by doing very straightforward deposit gathering to get funds and lending to SME businesses, in particular with the intention to focus on growth businesses. That is clearly socially useful, it is one of the core things we need a banking system to do.”
OakNorth Bank is just emerging from a licencing system established in a large part by Turner himself.
Prior to the crash, it was very difficult to get a licence issued – typically any new entrant would buy a spare from a big conglomerate, rather than getting a new one. Otherwise, it was hard to attract staff with no licence, and hard to get a licence with no staff.
Metro Bank was the first in a century really to start afresh.
Under the new system, a bank goes through a two-step process, attracting some capital and staff before gaining the approval which OakNorth received yesterday. Then it goes through the mobilisation phase, attracting more capital and fine-tuning details like its IT systems. OakNorth hopes to give its first loans this June.
“The initial focus is in London and the south east, and the Manchester region,” said co-founder Rishi Khosla. “We want to reach £1bn over the next five years. That is the current thinking.”
Turner is happy with that attitude, praising Khosla’s “philosophy.” And Khosla had better hope the pair keep on agreeing – Turner is adamant he does not want any fast sale either to a trade buyer or on to the stock market.