Osborne does the wrong thing while Hourican takes the fall

Mark Kleinman
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DEPUTY heads must roll. It’s impossible to decrypt yesterday’s Libor-rigging settlement between Royal Bank of Scotland (RBS) and regulators in the UK and US without being reminded of that immortal phrase.

John Hourican, who will step down as the boss of RBS’s investment bank at the end of April, is entitled to feel hard done by. By the admission of regulators and RBS board members alike, he had no case to answer over wrongdoing at the bank, much of it outlined in luridly self-interested messages disclosed yesterday.

Nevertheless, those close to him say he had accepted that his departure had become necessary to satisfy the political desire for a scalp.

“It is the right thing to do,” he told staff. “The jobs that many of us do are well paid and with high reward comes a greater responsibility.” He hadn’t anticipated the bloodthirsty way George Osborne would pursue the £4m in deferred share awards he had earned in previous years.

Hourican is not an impoverished man, and his career is far from over: indeed, his track record at RBS, generating more than £12bn of profit for the investment bank during his tenure, will leave him well-placed to land another top job in the industry. Yet while he will move on, for RBS and Osborne, Hourican’s rather brutal treatment augurs badly.

The group’s investment bank still has a balance sheet with £60bn in assets, a number not dissimilar in scale to the GDP of a small country.

Recruiting capable leadership for the unit has just been rendered next to impossible, particularly if – as was being noisily suggested at RBS’s investment bank headquarters on Bishopsgate yesterday – some of Hourican’s closest lieutenants follow him and jump ship.

It is hard not to interpret this meddling as creating a permanent impairment to the value of taxpayers’ stake in the bank.

Osborne walked into the Treasury in 2010 confident that he would soon be trumpeting the recovery of taxpayers’ money from Lloyds and RBS. His politically-myopic actions resemble those of a man repeatedly jamming his finger on the self-destruct button.

The listing of Russia’s main index, which published its flotation price range this week, offers a clue to the Kremlin’s view of those corporate emigres which have tapped capital markets in London and New York.

Even at the bottom of the indicative price range, the Moscow Exchange will be valued at a comparable level to its London rival.

One early candidate to list on it could be Megapolis, a Russian tobacco distributor which had harboured hopes of floating in London last year.

I understand that the UK Listings Authority raised reservations about some of the individuals involved in Megapolis. The company’s plans were quietly dropped, according to one insider familiar with the deal. Its next move will give an indication about the threat posed by London’s newest rivalry.

Fortunately for Sir Simon Robertson, he is a young 71. In recent months, he has needed to be. As deputy chairman of HSBC and chairman of Rolls Royce, the former Goldman Sachs partner has had a full in-tray dealing with corruption probes of varying existential significance.

His workload is about to lighten. Rolls’ May AGM will be Sir Simon’s last after eight years at the helm. People close to the company say it has used MWM Consulting, the headhunter, to conduct a global search for his successor. Expect an announcement from the aero-engine manufacturer in the coming weeks.