SAYING it with Flowers has just assumed an entirely new meaning. The debacle at the Co-op – fuelled by revelations about former bank chairman Paul Flowers’ extra-curricular behaviour – raises profound questions for regulators, government and bank boards alike.
Lord Myners, the former Labour city minister, was right to raise the possibility that this week’s fiasco could jeopardise the entire rescue plan for the Co-op Bank.
With a clear majority of investors needed to approve the proposals, some insiders are quite understandably worried that the Crystal Methodist might overshadow efforts to get the voters out in nine days’ time.
And the irony of voracious American hedge funds being concerned about associating with the tainted Co-operative movement would be delicious if it wasn’t so serious.
So far, there seems little real reason for institutional bondholders to have developed cold feet about putting up the additional £120m of capital they’ve pledged under the plan.
The Co-op Bank’s depositor base has remained broadly stable in recent weeks and has seen no significant impact from the Flowers scandal. If there hasn’t been any form of a run by now, there’s no reason to suspect there will be, they reason.
There are other concerns, though. Richard Pennycook, the Co-op finance director, has been trying to persuade the taxman to provide guidance to bondholders over the tax treatment of their investment decisions.
Separately, business secretary Vince Cable is expected to ask officials at his department to examine the troubled bank’s continued use of the Co-op name, assuming the restructuring is voted through.
Perhaps the hedge funds will be the ones arguing for a rebranding in a bid to distance it from past sins? After all, throwing Flowers onto the Co-op conflagration is causing a blaze as big as any other in British banking.
BARGAIN BANK BOSSES
Banks creating more value for investors than rival quoted companies: some mistake, surely?
Yet that’s the finding of a new piece of research by Patterson Associates, the remuneration consultancy owned by Pearl Meyer of the US.
The survey of 36 major European financial services groups, which assessed shareholder returns for each pound in pay received by chief executives, paints a surprising picture for those convinced that bank bosses have been handsomely overpaid relative to their peers.
Total remuneration between 2008 and 2013 for bank bosses was £8.15m, while for those running non-banks it was roughly 50 per cent higher at £13.3m.
The top three companies for adding shareholder value during the same period were all banks, with HSBC by far the outstanding performer among UK-based institutions, creating more than £4,000 in value per pound paid to its chief executive.
I understand that the major UK banks are consulting investors on resolutions to put to their annual meetings next year that would allow them to navigate the planned EU bonus ratio cap. Patterson’s study may give some shareholders food for thought.
TAKING A SHINE TO DIAMOND
Spotted deep in conversation at Claridges last weekend: Lord Mandelson and the man he once branded “the unacceptable face of banking”, Bob Diamond.
My mole at the hotel wasn’t quite close enough to the pair to discern the nature of their discussion, although people close to both men promise me they aren’t going into business together.
It would hardly be an incongruous alliance. Diamond’s Africa-focused merchant bank, Atlas, would dovetail neatly with many of the clients the Labour Peer has accumulated since establishing Global Counsel, his advisory business, in 2011.
Despite their protestations, I suspect that the relationship between the former Barclays chief executive and one-time European Union trade commissioner will ultimately extend beyond breakfast at London’s finest hotels.
Mark Kleinman is the City Editor of Sky News @MarkKleinmanSky