Robin Leigh-Pemberton: Governor of the Bank of England who steered the City through the profound changes of the Big Bang
Tuesday 26 November 2013
As Robin Leigh-Pemberton, Lord Kingsdown was Governor of the Bank of England for two successive five-year terms, from 1983-1993, a period in which the City underwent more fundamental changes than it had in the previous century. The Big Bang liberated all the players; rules of ownership were broken and firms considered major players in the decades before 1986 were deemed mere minnows to be swallowed by major foreign financial institutions, mostly American. It fell to the lot of this profoundly conservative English gentleman, who always said that "by nature I am an optimist", to try to control the turmoil involved. By sheer common sense he helped ensure that the process did not create either chaos or gross dishonesty, but the cost to the Bank's stature was considerable.
In the 55 years before his appointment Leigh-Pemberton had shown some signs of his qualities. One problem, in a sense, was that his background was so secure. His father owned 2,500 acres of fine agricultural land near Sittingbourne in Kent. His mother was the daughter of the Rector of the village of Sessay in Yorkshire. He went to Eton, where he showed promise as a mathematician and won a Classics scholarship to Trinity College, Oxford. Before that he spent three years in the Grenadier Guards, which "taught me a lot about leadership." He acquired considerable self-confidence and what one close observer described as "inner peace". Perhaps the best comparison was with Willie Whitelaw, another country gentleman who concealed a sharp mind because it was not gentlemanly to parade signs of intellectual superiority,
He qualified as a barrister and spent seven uneventful years practising, but in 1961 returned home to lead the life of a country gentleman. He undertook a number of appropriate public duties, as leader of the Conservative Group on the County Council, member of the committee of the County Cricket Club, pro-vice Chancellor of the newly-created University of Kent, and as a deputy Lord Lieutenant. He recreated the garden on his 2,000-acre Torry Hill estate in Kent whose rambling Victorian mansion had been demolished in the early 1950s, and in 1958 he and his wife Rosemary decided to build on the site of the house and re-establish the once splendid garden.
It was the Marquis of Exeter who disrupted this idyllic life by inviting him on to the board of Birmid-Qualcast, an engineering group best known for its lawnmowers. He said that though nepotism got him there, it must have been his own qualities which saw him become chairman 10 years later. He had been on the local board of the National Westminster Bank, and in 1972 joined the main board. Within two years he was executive vice-chairman, and in 1976 succeeded Sir John Prideaux as chairman.
The financial collapse following the first oil shock of 1973-74 had been disastrous for the bank, but Leigh-Pemberton steadied the ship so successfully that in 1982 he was asked to take over as chairman of the Committee of London Clearing Banks. As such he met civil servants and politicians, including Mrs Thatcher and her influential adviser Sir Alan Walters, although he claimed that his only lunch at Chequers before his appointment was to discuss being made Lord–Lieutenant of Kent. When he was appointed it was assumed he had been chosen as the Treasury's revenge on the Bank – the two institutions had been on bad terms during the first two troubled years of Thatcher's administration – and that he would be her creature and a figurehead in the hands of the professionals.
His appointment took the financial community by surprise, for she disliked and distrusted the affluent squirearchy of which he was such a notable example. His qualities – his decency, his clear capacity as a chairman – were counter-balanced by his lack of experience of international banking. Surprise was accompanied by dismay. A typical reaction was the leader in the Financial Times "the failure to choose a successor to Gordon Richardson with greater experience and standing both in international and domestic banking circles is a cause for concern." The concern appeared justified soon after with his reaction to the settlement of a disastrous Mexican debt crisis. The new Governor said, reasonably enough, that "I think the crisis is over." But he added a phrase with which every banker in the world would have disagreed "If there ever was a crisis."
The criticism this naïve statement aroused led the new Governor to be more prudent over the years, and to rely on his talents as a practical chairman, not as an intellectual. Indeed he felt that the role of the Bank was largely limited as "primarily the guardian of the monetary system, of the currency and of confidence in it."
Other comments showed much common sense, though not always to the taste of some, suggesting that inflation was a more serious threat to western democracy than communism and that he would resist any attempt by the left to devalue the pound. It was clear, as Stephen Fay put it in Portrait of an Old Lady, "that the new governor was not in the same mould as Richardson. This should have come as no surprise; since Mrs Thatcher did not want another proud and egotistical man at the Bank, she had appointed someone with the qualities of a good chairman ... Unlike Richardson, the new Governor did not keep highly paid officials waiting in the corridor, and when he was asked for a decision he made up his mind pleasingly quickly. The staff, from the chief doorkeeper to the deputy governor, liked him without reservation. [But] it was difficult to show that he was being treated as anything other than a figurehead."
Moreover he was never happy when discussing the more technical aspects of his job in public, above all in front of House of Commons committees. On these and other occasions he relied heavily on Eddie George, who had risen to become an executive director in 1982 when a "mere" – by the Bank's standards – 43.
"I don't like to interfere unduly," he told Fay. "I'm satisfied as long as I know that the system is working." He would agree or disagree with a proposal swiftly and leave its execution to his staff, most obviously to George, the supreme professional who succeeded him in 1993.
Yet he proved that many of the supposed qualities required were largely mythical, not beyond the reach of a sensible and intelligent operator, and this demystification of the Governor's role was not the least of his achievements. He was lucky in being shielded by the substantial figure of Nigel Lawson, the Chancellor; by himself the new Governor could never have coped with Thatcher. As he told Lawson after one stormy encounter during the sterling crisis of 1985, "I don't know how you put up with this sort of thing."
It helped that he was more flexible than his proud, unbending predecessor and was prepared to let the Chancellor take control of monetary policy. Moreover, within the Bank and the Treasury he and Lawson were virtually alone in the mid-1980s in their support for British entry to the European Monetary System.
His inexperience was demonstrated most vividly by the Johnson Matthey affair. The bank was not in itself an important one, but was a subsidiary of the John Matthey group, one of the key players in the world bullion market. So the failure of the bank in December 1984 – due to imprudent loans to a handful of shady characters – put the group, and, it was felt, London's position in the gold market, in danger. The Bank rallied round, and placed £100m at the group's disposal, but without telling the Treasury or the Chancellor. The news leaked and the subject was taken up by the maverick Labour MP Dennis Skinner, appalled at the apparent generosity with public funds during the miners' strike.
To make matters worse the clearing banks were unhelpful in contributing to a support fund, so the Bank had to supply half the final total of £150 million in loan guarantees. The clearing banks felt that Leigh-Pemberton, one of their own, had let them down through his inability to prevent the Treasury from treating their profits as a bottomless reservoir of funds. No wonder he was prepared to admit that these had been "anxious times".
In the event the Bank lost only £30m but the affair resulted in a new committee to examine the link between the two classes of banks, "recognised" i.e. "proper", and the "unrecognised", and thus, by implication, less proper. Lawson saved the Governor from embarrassment by making it an internal enquiry, which he headed. By blaming the "two-tier system" the Bank's supervisory department was spared. Moreover, and despite continuing revelations about the handling of the affair, the Governor gained the right to chair a new Board of Banking Supervision, a development in itself much opposed by the Bank. As Lawson put it, this was designed to assist the Governor and "give more forceful direction to the task of Bank supervision" – which Thatcher had wanted to take away from the Bank; four years after Leigh-Pemberton's departure Gordon Brown succeeded where Thatcher had failed. Moreover the new regulatory system backed by the 1979 Banking Act, actually increased the Bank's influence.
But Lawson was unable to overcome Thatcher's implacable opposition to his proposal, secret at the time, to make the Bank an independent, albeit accountable institution. Leigh-Pemberton claimed that had it been independent it could have done more to dampen the market frenzy which preceded the market slump of late 1987. Nevertheless he recognised that independence would have placed on the Bank a burden of public expectation – that it could control inflation without too much damage to the growth of the economy – which it was in no position to meet.
In retrospect the greatest contribution Leigh-Pemberton made was that he, the supreme traditionalist, presided over the opening of the previously convoluted structure of the City of London. He allowed the world's bankers in to take over most of the City's most historic institutions, albeit at prices which turned out to be hopelessly exaggerated. In doing so they dashed his naïve hope that British-owned firms would not play a subordinate role in the New City. He helped ensure that London would play an ever-increasing role in the world financial system but in doing so he diminished the Bank's influence. It was under the most gentlemanly of Governors that the Bank had become a professional rather than a gentlemanly institution.
On retirement he took on a handful of non-executive directorships and, with some impressive fellow-investors, was involved in two consortia, both unsuccessful, in bids for major projects, one to set up a national lottery and then to build the Channel Tunnel Rail Link.
His later years were overshadowed by the legal actions surrounding the Bank's possible responsibility for the collapse in 1991 of BCCI amid allegations of fraud and corruption. Eventually, in 2005, a major creditor, the state of Abu Dhabi, was persuaded to drop its claims against the Bank of England.
Robert (Robin) Leigh-Pemberton, banker born 5 January 1927; Governor, Bank of England 1983–93; cr. Life Peer 1993, KG 1994; married 1953 Rosemary Davina Forbes (four sons, and one son deceased); died 24 November 2013.
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