City watchdog met with Saudi Aramco before unveiling new London listing plans

Rebecca Smith
The Business Committee chair said what was good for the City wasn't necessarily good for the UK
The Business Committee chair said what was good for the City wasn't necessarily good for the UK (Source: Getty)

The chief of the City watchdog has said he met with Saudi Aramco early this year ahead of publishing plans to create a new category for sovereign firms to list in London.

Andrew Bailey, chief executive of the Financial Conduct Authority (FCA) wrote to Nicky Morgan, the chair of the Treasury Committee, and Rachel Reeves, chair of the Business, Energy and Industrial Strategy Committee, in response to queries over the extent of government influence over the proposals to create a new category within its premium listing regime.

In the letter published today, Bailey wrote: "As you might expect, in the normal course of the FCA's duties, we hold meetings with potential listing candidates which, given the commercial sensitivities, we do not disclose.

However, given the public discussion of these events, we can confirm that we held conversations with Saudi Aramco and their advisors in light of their interest in a possible UK listing in the early part of this year. We emphasised during those conversations that we were reviewing the listing regime.

The move set out in July will allow sovereign companies such as Saudi Aramco to qualify for a premium listing on the London Stock Exchange.

MPs said today that questions still remained about the proposals, amid concerns that the move, which could result in the world's biggest initial public offering for the oil giant, will water down corporate governance rules.

Today, Morgan said:

Questions remain about the level of political involvement in the consultation. The UK’s world-class reputation for upholding strong corporate governance mustn’t be watered down.

The Committee will examine this further when it takes evidence from Mr Bailey later this month.

Bailey also said in the letter that the proposals wouldn't be detrimental to investors.

He wrote: "We do not think protections for investors will be weakened. Plainly, absent the new category, sovereign-controlled companies would be unable to choose a premium listing; they would therefore not be bound by any of the premium listing requirements that might otherwise offer additional protection for investors."

Bailey said some criticism of the proposal left the "incorrect impression that the premium listing is monolithic in form, and therefore, that any issuer included in that category must also be included in the main FTSE UK index".

The MPs, however, said there were still questions lingering over the impact of the proposed changes.

Reeves said: "What may well be good for City traders is not necessarily good for the rest of the country's economy or investors. It is not at all clear how taking these steps will boost jobs, investment or returns to investors in the UK, and I look forward to examining the FCA's proposals once their consultation has concluded."

Yesterday, investor group the International Corporate Governance Network said the plans were "fundamentally flawed", and increased risk.

Consultation on the FCA proposals close today, with Bailey saying it will take "all feedback into account in deciding whether to proceed".

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