Well that didn’t last long. Optimism about a rapprochement between the Bank of England and major international banks has had the City bewitched since Mark Carney’s intervention last month to relax liquidity rules, marking a distinct break with the approach of his predecessor, Lord King.
It may not be quite that straightforward: two subsequent developments relating to a common theme – the Capital Requirements Directive IV from Brussels – suggest the reality is more nuanced.
Two weeks ago, Sam Woods, an executive at the Prudential Regulation Authority (PRA), met a group of institutional investors, some of whom were left with the impression that the biggest UK banks face having to raise unexpectedly large sums of new capital as the Bank of England applies the new rules.
The banking watchdog is also conducting a modelling exercise with the biggest overseas lenders’ UK subsidiaries, the results of which have begun trickling through to them in recent days.
Some of these banks have been concerned by what they perceive to be an excessively robust approach, with the PRA suggesting that their UK balance sheets could be “red-lighted” by the regulator.
So alarmed were the bankers that several suggested during a recent meeting about the issue that large volumes of their credit business might have to be booked in other financial centres.
Surely Carney would deem such decisions to be at odds with recent proclamations about the City being open for business?
SHARE OPTIONS ARE BEST FOR RM2
The former bosses of Diageo, Marks & Spencer and Volvo, and a member of the Molson brewing dynasty: it sounds like a selection round from a game of Fantasy Directors.
Instead, it’s a quartet that has ended up in the unlikely environs of a pallet-maker’s boardroom. Step forward, RM2, a Swiss-based company which is heading for an Aim flotation next month buoyed by the recruitment of non-execs including Paul Walsh and Sir Stuart Rose.
Their expertise should be invaluable to a company which is building a following among multinationals such as Heinz and Unilever.
I understand that RM2 is to pay its coterie of high-profile directors entirely in share options, a remuneration tactic frowned upon by corporate governance obsessives because of concerns that it can compromise non-execs’ independence.
That theory may hold true at established companies, where executives’ feet are best held to the fire by directors who are not automatically incentivised to side with them.
At early-stage businesses, the reverse case is more easily arguable. Attracting the likes of Rose or Walsh would be implausible for the standard non-executive’s fee of £50,000 at a little-known company.
Paying such stellar figures in options that may yield a tidy sum if the company expands successfully would also benefit the wider shareholder base. RM2’s existing investors are said to share that sense of enlightened self-interest.
NEW PAY TOOL AT ISS IS A WINNER
On the subject of executive pay and potential conflicts of interest, an intriguing email dropped into my inbox this week from a FTSE-100 chairman.
A sales pitch from a subsidiary of Institutional Shareholder Services (ISS), the proxy voting adviser, it was promoting ExecComp Analytics, a new executive remuneration tool.
It could, the email exclaimed, help companies navigate the complex milieu of boardroom pay “in light of recent UK legislative reforms relating to shareholder rights and executive remuneration disclosure”.
So ISS wants to make money out of helping boards avoid shareholder revolts and then – presumably at the expense of those who don’t buy the new “tool” – make money advising investors to vote against remuneration policies.
The chairman who sent it to me was dismayed. It sounds like a smart piece of business to me.
Mark Kleinman is the City Editor of Sky News @MarkKleinmanSky