FROM the forthcoming report of the Parliamentary Commission on Banking Standards to a possible resignation letter from Paul Tucker: Mark Carney has an unenviable reading list before he sets foot in Threadneedle Street as the new Governor of the Bank of England.
If he wants a genuine cold-towel moment ahead of his arrival, however, he should reach for a paper being finalised this week by the Association of British Insurers (ABI) about the present case for investing in UK banks.
An earlier draft of the document, passed to me earlier this month, amounts to a brutal warning of a buyer’s strike across the sector.
Among the dozen-or-so cautionary notes about what the ABI calls “the new model”: investor scepticism about the ring-fencing model being imposed on UK banks; confusion about the benefits of bail-in capital; and the potential negative impact on equity demand from the issuance of instruments such as Cocos. As chairman of the Financial Stability Board, the international banking policy-making body, Carney has urged big global lenders to hold more capital, more quickly as the industry migrates towards Basel-III.
The ABI rightly raises a red flag about where that capital will be sourced from. Sustainable dividend policies and a clear path towards an attractive return on equity, it says, are essential – but even they will not be sufficient in themselves.
The implications of this capital scarcity for banks’ ability to lend to the wider economy make it as big as any of the myriad other challenges confronting Carney when he takes up his new post. Alarm bells should be ringing all the way to Ottawa.
MONITISE MULLS £100M FUNDRAISING
George Osborne may have snatched Carney from across the Atlantic, but the reverse journey is more common when it comes to breeding successful technology companies.
My sources tell me that it will be worth watching Monitise, the mobile payments company part-owned by Visa, the credit card giant, in the days ahead.
Monitise has already passed the (electronic, of course) begging bowl around shareholders on six previous occasions. I understand it is now in discussions with investors about a further fundraising of up to £100m.
The latest deal, arranged by Canaccord Genuity, is not born out of necessity, according to insiders, since its business plan is already funded through to next autumn.
Monitise has, however, floated the prospect of shifting the company’s listing to New York when it decides it has outgrown AIM.
That is of broader significance than one company. London’s claim to be a tech investment hub would be damaged by a continued exodus of such high-growth businesses overseas.
At some point Monitise’s investors – like those of other migrating tech companies whose birthplace was in the UK – stand to be rewarded for the expansion capital they’ve injected. Nasdaq’s gain would be Aim’s loss.
UK TAX SLIPPING DOWN THE AGENDA
Burberry, Diageo and GlaxoSmithKline: three British companies with foreign competitors paying questionable levels of tax on their UK profits and whose chief executives advise David Cameron.
So when the Prime Minister’s Business Advisory Group met in Downing Street earlier this month, it would have been reasonable to suppose that the avoidance of UK tax obligations by foreign multinationals would have been high on the agenda.
Not a bit of it: a spokesman for Number 10 says the discussion focused on skills, and that corporate tax was not raised.
Whether it was good manners on the part of Mr Cameron’s guests or a wilful blindness to tackle an issue causing genuine public outrage, the omission was an oversight on both sides.