A friend of mine is a head-hunter, responsible for finding likely people for top banking jobs. Two weeks ago I asked him how business was.
Working flat out, he replied, rattling off three or four bank posts he was trying to fill. I was impressed – these were kingpin roles. But he pulled a face. Trouble is, he said, there were few serious candidates around; he was struggling to put up decent names; the pool he was dealing with was so small. The problem was that while there are plenty of bankers, coming up with one qualified and untainted in any way by events of the past five years that would prove acceptable to investors, politicians, media and the public is proving incredibly difficult.
There is hardly a bank that has not been the focus of scandal since the collapse of 2008. It used to be the case that among the big British players, Standard Chartered was in the clear – highly thought of, most of its business in the Far East, its senior executives in demand elsewhere. Then it was hit by claims of laundering money for Iranians and had to pay $340m to settle.
HSBC? Like Standard Chartered, it was not party to the great bank rescue. But then its Mexican operations were found to be a ready conduit for the drug cartels and it was fined a record amount by the US authorities. Barclays? It, too, was famously immune from the bailout but later was revealed to have only escaped the Treasury lifeboat by allegedly bribing wealthy Arab investors to give it their backing, and a group of the bank’s traders was accused of manipulating Libor.
I could go on. Try it for yourself: try and pick a well-known bank or a leading banker who is not touched in some way by accusations of product mis-selling, rate fixing, making dodgy loans, possessing overweening ambition causing customers’ funds to be put at risk.
Give up? Now you know why the same tight crop of individuals is always being suggested for every appointment going. Following Sunday’s exposure of the Rev Paul Flowers, former chairman of the Co-op Bank, for buying hard drugs, including crack cocaine and crystal meth, that list has just got smaller.
The sad truth about the Rev is that he ticked all the right boxes – bar one. He was made chairman of a bank, but freely admitted to not knowing much about banking. You would think that we’d been here before, notably with Matt Ridley, an environmental journalist, being appointed as chair of Northern Rock, Andy Hornby, of Asda, becoming group chief executive of Hbos and Fred Goodwin, an accountant by training, taking over Royal Bank of Scotland.
All those appointments ended in disaster.
Earlier this month, Flowers’ ignorance about his sector was highlighted before the Commons Treasury Select Committee. However, while MPs picked him up on the statement that his bank’s assets were £3bn, rather than the correct £47bn, his lack of expertise was previously well-known within his own organisation and had even been flagged up by the external regulator.
Indeed, so marked was its concern that the Financial Services Authority remarkably had proposed to the Co-op when he became chairman in 2010 that Flowers should be assisted by two deputy chairmen with banking experience.
The FSA has a lot to answer for in relation to Flowers’ arrival at the summit of the Co-op Bank. Its complacency, in the face of numerous bank collapses, is shocking.
But then, as with Ridley, Hornby and Goodwin, we did not shout either. We’re content for our banks not to be managed by bankers. Then when they fail, we scream they should be run by bankers.
Meanwhile, the number of bankers we’re prepared to trust gets ever smaller. If the system is to change, we have to ensure our banks are led by proper, qualified bankers and we must begin to trust bankers again.