Outlook A matter of principle. At least, that’s how the impending resignations of John Trueman and Alan Thomson from HSBC’s UK bank are being cast. It seems that they are unhappy with rules being proposed by the Prudential Regulation Authority that could, in theory, result in bankers being jailed if their employer collapses and it emerges that they didn’t take reasonable steps to prevent it.
There was always going to be some industry blowback over this. The fact that it is coming from HSBC shouldn’t surprise us. Lloyds and Royal Bank of Scotland, propped up by taxpayers, aren’t in a position to kick up a fuss. Barclays, meanwhile, is battling with regulators on multiple fronts and on both sides of the Atlantic.
When the resignations are formally announced you’ll probably hear Douglas Flint, the bank’s respected chairman, voicing his support for his colleagues while fretting how on earth his bank is going to attract non-executive directors if they’re risking jail by taking on the jobs.
Except that they’re not. The rules may appear draconian. But to avoid falling foul of them, directors just have to do their job. In other words, they have to remain vigilant and engaged in their bank’s operations. They have to take reasonable steps to ensure everything is shipshape and that the bank is obeying the rules. Do that and they’ve nothing to worry about.
If Mr Trueman and Mr Thomson (assuming they both pull the trigger) aren’t prepared to comply with those very reasonable requirements, HBSC could be well shot of them. And if the rules result in a further clearing of the house at HSBC, and perhaps at other banks, then it is something that should be welcomed.
If you want an example of what can happen when non-executive directors don’t do their jobs just look at Tesco, which was spending millions on private jets at a time when customers were walking out of the door. Not to mention the small matter of reporting £250m in phantom profits.
Now imagine that happening at a bank. Except that we don’t need to. We just need to take a brief look at the recent history of Royal Bank of Scotland. None of the directors who presided over the near-collapse that led to a £40bn-plus state bailout has been formally sanctioned (with the exception of Johnny Cameron, who agreed to it). Incredibly, several have since found alternative employment.
If the cost of preventing a repeat of that mess is people like Messrs Trueman and Thomson making space around the boardroom table, it’s a small price to pay.Reuse content