COMMENT: Another quiet exit from Threadneedle Street
Tuesday 12 September 1995
You can bet that Mr Quinn will retire with full honours, as befits a senior member of the Bank's court. Supervision is the unglamourous part of the Bank's work and also its most thankless. It was Mr Quinn's unlucky lot to have been involved in supervision during all of the last big banking collapses - Johnson Matthey Bankers, BCCI and Barings. If past form is any guide, nobody at the Bank will make any public comment about Mr Quinn's retirement, which might remind us that he held office during a period when the Bank was criticised in the report on Barings by the Board of Banking Supervision.
When Johnson Matthey Bankers was ripped apart by fraudulent clients under the Bank's eyes, the debacle was serious enough to prompt a new Banking Act. But all that visibly happened at the Bank was that the executive director responsible for supervision was moved blamelessly sideways - to take charge of the Bank's input into new international supervision rules.
After the BCCI collapse and the report on it by Lord Justice Bingham, the only detectable change at the Bank was an early retirement of a manager in the supervision department, to denials all round that there was any connection between the two events.
There has been one resignation at the Bank as a result of the Barings report - Christopher Thompson, a middle-ranking manager in the supervision department. You could call that progress, since this is the first time the buck has publicly stopped anywhere. But while the Barings report did not criticise senior people at the Bank, it contained enough material on the weaknesses of supervision to justify the buck stopping rather higher.
When Mr Quinn goes, expect to hear that his decision is entirely personal, in the belief that after a long and difficult stint in the same job it is time for a fresh eye. The Bank's closely-knit culture being what it is, that claim will be true. Mr Quinn is such an old hand that he will be the first to know when his time is up, without any prompting from his colleagues.
The people demand consumer champions
Those who want to see North West Water's bid for Norweb referred to the Monopolies and Mergers Commission will not, it seems, be getting much help from the two industry regulators involved. Consultation documents are rarely what the name implies. Most of the time the ministers, civil servants and regulators involved in their construction have already made up their minds. It might be possible to make changes at the margin, but that is all.
So it appeared yesterday with a joint consultation paper - a first, this - from the water and electricity regulators Ian Byatt and Professor Stephen Littlechild on North West Water's bid.
In essence, what this document amounts to is an admission that even had they wanted to do something about this bid, they are powerless to do so. No wonder Sir Desmond Pitcher, chairman of North West, was so confident of regulatory clearance when he launched his bid; yesterday's document amounts to virtually that.
There is plenty of huffing and puffing, some suitable thumping of the chest, but beyond demanding appropriate licence amendments to safeguard transparancy of accounts, the regulators have been unable to put up any fundamental objection. There might be a case for a reference, the regulators concede.
A view must be formed, for instance, on whether the merger will bring about an undue concentration of economic power. But this is a public policy issue that goes beyond our remit, they conclude.
They are, of course, right. The powers and duties of regulators are narrowly defined and when it comes to changes of ownership, they are restricted in what they can do. In declaring their impotence, however, they have put their finger on all that is wrong with Britain's system of regulation.
What the people demand is consumer champions, regulators tough and powerful enough to carry out the public will. What we have are regulators who are also duty bound to pay safeguard the interests of shareholders and investors; in so doing, the consumer appears to have had a raw deal. The present takeover free-for-all only strengthens the case for fundamental reform of the regulatory system.
The bright idea returns to haunt the minister
Tim Eggar, the industry minister, has deservedly been getting some of the credit for the bright idea of a special dividend planned as a preliminary to the flotation of the National Grid, now owned by the regional electricity companies. It has, however, come back to haunt him in the shape of four grid directors who will benefit mightily if it is allowed to go ahead. Mr Eggar wants them to relinquish their claims, which he finds politically embarrassing.
The background to this little bit of fat cattery bears some repeating. If the Grid is sold with its present low levels of debt, it will produce a familiar animal; a potentially very lucrative utility with gearing in single figures. As the regional electricity companies have already shown, privatising utilities in this state can translate into a bonanza for investors.
Mr Eggar's bright idea is to raise the Grid's gearing before the flotation by paying a special dividend of perhaps pounds 850m to the recs that own it, replacing the funds with loans. Though this will have little effect on the Government's tax take from the sale, Mr Eggar believes it will help in presentational terms. The special dividends already out of the way, the National Grid, when floated, will not be quite the same bloated animal as the RECs were.
Unfortunately, the government did not remember until rather late in the day that the grid was not entirely owned by the RECs. Directors of the Grid have some too, which makes them entitled, along with the RECs, to the dividend. David Jeffries, the chairman, is alone entitled to nearly pounds 200,000. Whether he deserves it or not is beside the point; the idea that moral blackmail should be used to prevent shareholders of any kind taking up their legal entitlement is worrying.
In this case, the entitlement stems from decisions made by ministers at the time of privatisation. Furthermore, the controversy ultimately arises because of the Government's serious underpricing of the sale of the electricity industry. The government constructed this bed of nails for itself and it would be more dignified if Mr Eggar agreed to lie quietly on it.
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