Inside Track: Hester raises a glass to Sir Mervyn King – or his departure

Mark Kleinman
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STEPHEN Hester is not widely known for his sense of irony, so it was with particular acerbity that he stood in front of 300 Royal Bank of Scotland (RBS) colleagues last month, glass in hand, to propose an impromptu toast.

The subject of his tribute? Sir Mervyn King, soon-to-depart as governor of the Bank of England.

There is little love lost between the two men. According to recent testimony to the Parliamentary Commission on Banking Standards, King is the would-be architect of a very different RBS to that run by Hester.

It was, he declared, “a nonsense” that RBS should continue to operate, ensconced in the taxpayer’s bosom, as a universal bank.

While not irrelevant, King’s misgivings about RBS’s structure are several years too late. Hester’s execution of the strategy he outlined in 2009, utilising the profits of its core investment banking business to reinforce the capital position of the wider group, has been little short of exemplary.

The permanent impairment to the value of taxpayers’ stake in RBS from regulatory reforms already on the statute book is substantial, but that does not mean it should be exacerbated to the point of dissolution.

And there is another consequence of the uncertainty propagated by the governor’s attention-seeking flip-flopping over RBS’s future. Insiders say the bank’s chairman, Sir Philip Hampton, is finding it virtually impossible to recruit a high-calibre non-executive director to replace Joe MacHale, the last survivor of the Fred Goodwin era at RBS.

That’s hardly surprising. Among the early priorities of Mark Carney, King’s successor, should be a more responsible tack to public pronouncements on Britain’s big banks.


Beyond a limited ego boost and intermittent access to the most powerful people in government, a FTSE-100 chief executive said to me recently, there is little to recommend membership of the Prime Minister’s Business Advisory Group.

The most recent gathering reinforced his point, he said.

Sat among the likes of Philip Clarke, Tesco chief executive, and Sir Roger Carr, president of the CBI, David Cameron ignored the opportunity for a constructive debate about Britain’s economic future.

Instead, according to more than one person present, he lambasted the assembled bosses over recent scandals which have further damaged the reputation of British business. The companies they represented, he said, must demonstrate their commitment to paying the appropriate levels of tax if they want to repair their image.

“It was a self-important lecture about how a particular behaviour is not acceptable just because it is within the letter of the law,” said one of the attendees.

A more self-aware Prime Minister might have drawn parallels with the parliamentary expenses scandal of 2009 but – with apologies to Private Eye – mention came there none.


Somebody Cameron could use some advice from about getting things done in a hurry is Harriet Green, only recently installed as boss of struggling tour operator, Thomas Cook.

Green’s actions have not been especially friendly to the company’s employees: thousands of jobs are being axed. But shareholders have welcomed her actions: the company’s share price has soared since she took over in the autumn.

Now, I understand, Green has drafted in Gleacher Shacklock, the investment banking boutique, to cement plans for a share placing that will aim to raise roughly £400m.

Expected to be announced next month, the fundraising should secure Thomas Cook’s future for some time to come. Not bad for a business that a year ago looked to be on its knees.