ABI floats a big change in listings

Mark Kleinman
Follow Mark

UNLIKE Britain’s glorious sporting summer (at least until England started batting at Trent Bridge yesterday), there was a distinctly anti-climactic feeling when John Kay published his inquiry into short-termism in Britain’s equity markets last year.

Governance scandals at Bumi Resources, ENRC and elsewhere left investors seething over the misalignment between those involved in the capital-raising process and the investors whose long-term interests the capital markets are supposed to serve.

Enter the Association of British Insurers (ABI).

In a paper published today, the City’s most influential shareholder group argues for a fuller overhaul of London’s listing standards in an effort to reorient equity markets in their core purpose.

Among its key recommendations is an improvement of the price discovery process for IPOs by obliging firms to issue an approved prospectus earlier than is current practice.

The ABI also says that controlling shareholders of companies listing in the UK should bear legal responsibility for certain contents of prospectuses, which should focus minds.

Independent boards should be in place at least a month before an intention to float is announced.

Bankers also come in for targeted criticism. IPO syndicates should contain no more than three bookrunners for large transactions, while incentive fees should not be determined until up to three months after the listing date.

These are sensible ideas. If implemented, they would bolster transparency and should aid longer-term wealth creation. Kazakh-based oligarchs may not agree, but that’s in everyone’s interests.

After three years spent battling with Sir Stelios Haji-Ioannou, the rest of his business life must feel like a walk in the park for Sir Mike Rake.

But while public rows about aircraft orders might be behind him, for the new CBI president and recently-exited EasyJet chair, another headache looms.

The question is this: does Rake’s progress to the top of Britain’s most influential business lobbying group pose a conflict that should place him in the departure lounge of Barclays, the bank where he serves as deputy chairman?

Ongoing disputes between the banking sector and the rest of the business community about access to finance would suggest so.

Royal Bank of Scotland’s decision to commission an independent audit of its business lending activity, announced last week, confirms that this issue remains as large a source of tension today as at any time since the 2008 banking crisis.

Rake, who also chairs BT, does not see it that way. Friends say he is determined to remain at Barclays – at least in the short term – as the bank attempts to move on from the scandals of the past year.

If he intends to use his CBI presidency as a platform to campaign for the role of financial services in a recovering economy, that would be understandable. It would be less so if he insisted on doing that while exposing himself to charges of hypocrisy every time Barclays is guilty of shabby treatment of a small business customer.

Lord Levene and Sir Win Bischoff must be sick of the sight of each other. The former chairman of Lloyd’s (the insurance market) and current chairman of Lloyds (the bank) certainly have cause to be.

For Levene, a sense of injustice over the failure of NBNK Investments’ bid for 632 Lloyds branches burns deep. Bischoff, meanwhile, is said to be smarting over public aspersions about his integrity made by Levene in recent weeks.

So it isn’t without irony that I understand that the man heading the panel to identify Bischoff’s successor as chair of TheCityUK’s advisory council is none other than... Lord Levene. Those nominations committee meetings must be tasty affairs.

Mark Kleinman is the City editor of Sky Newstwitter.com/markkleinmansky">