The Salz Review, looking at business practices at Barclays, is out. Click to read.
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The Salz Review, looking at business practices at Barclays, is out. Click to read.
Sir David Walker has been asked to salvage the Financial Services Authority’s long-awaited – and highly controversial – report into the collapse of Royal Bank of Scotland, reports the FT. The report, originally promised for March, is expected to delve into the failings both the financial watchdog body and of RBS management ahead of the government’s rescue of the bank in 2009. It will also explain why the regulator decided not to take disciplinary action against the bank and its leaders. The FSA’s handling of RBS has been debated for months. The regulator drew strong criticism in December when it announced it had closed its probe into the bank without bringing charges. After insisting no detailed explanation was necessary, Lord Turner, FSA chairman, had to make a U-turn and commission a formal report on the bank, which is still 83% government-owned.
George Osborne is set to water down plans to force disclosure of bank bonus payments above £1m, in a move that will delight the City but sets up a political clash with business secretary Vince Cable and the Liberal Democrats, reports the FT. The chancellor has been lobbied by senior bankers who claim that if Britain introduces more pay transparency unilaterally it could put the City at a disadvantage and lead to some banks shifting activity to New York or other financial centres. Mr Osborne shares those concerns, as does Sir David Walker, author of an influential report last year on City pay disclosure, who argues in the Financial Times that the government “would be mistaken” to go it alone. Mr Osborne’s change of heart will delight the major banks, which have mounted a fierce lobbying operation to persuade him to shelve plans for more transparency ahead of a politically charged bonus season in February and March. Sir David’s proposals for disclosure of remuneration above £1m for bank employees, but not board members, were put on the statute book by the last Labour government. Mr Osborne has been dragging his feet in putting them into practice.
Here’s an entertaining rant from veteran City fund manager Barry Olliff.
It can be found in the annual results statement of City of London Investment Group, as Olliff spells out why the guidelines on pay in the Walker report are wrongheaded, why they won’t be conforming, and why the existing system of remuneration in the Square Mile is broken. Read more
A group of prominent City figures including Lord Levene, chairman of Lloyd’s of London, and corporate governance expert Sir David Walker plan to set up a new bank, the FT reports. The vehicle, as yet unnamed, is set to list as a shell company in coming weeks. It would then make a small acquisition of an existing operation with a banking licence, before tackling more ambitious dealmaking.
The UK Treasury is considering tougher requirements on bankers’ pay disclosure than those proposed last week by Sir David Walker.
Alistair Darling, the chancellor, announced a formal consultation on Monday on whether legislation should go further than the Walker review, which proposed that banks should disclose the numbers of employees earning above £1m in bands of £5m. The news came as Sir Christopher Hogg, chairman of the Financial Reporting Council, indicated that his review of UK corporate governance, published on Tuesday, would be more far-reaching than Sir David’s recommendations on bank boards.
Big UK banks will have to disclose how many of their UK employees are paid more than £1m under proposals to be published on Thursday by City banker Sir David Walker. Sir David will say that half the bonuses paid to employees should be deferred for three to five years. He will also propose that non-executive directors accept more responsibility for pay and risk, and ask institutional shareholders to engage more with the companies in which they invest.
The guidelines designed to increase the transparency of large private equity firms and and portfolio companies should allow for better analysis. Debate continues as to whether the guidelines are enough or too much, but the hope is that they will eventually evolve into an integral part of working practices much like the Takeover Code, declares Sir David Walker, author of the new guidelines, writing in Thursday’s FT.
Sir David notes that the taxation and distribution of the significant returns generated by private equity is important and relevant to the debate. Yet as a result of the consultation process it was also evident that there is very little understanding of the economic impact of large-scale buy-out activity. The data needed to support rigorous evidence-based analysis of employment and economic effects is insufficient, notes Sir David. Read more
The battle for Northern Rock intensified on Tuesday when the largest shareholder substantially raised its stake in a sign of its determination to block Sir Richard Branson’s takeover of the stricken lender. Jon Wood’s SRM hedge fund increased its stake to 8.5% in a clear power play intended to cajole the bank’s board into looking at other suitors in addition to Sir Richard’s Virgin consortium, which was chosen by Northern Rock’s board this week as preferred bidder. Mr Wood and RAB Capital, whose combined holding in Northern Rock is more than 15%, and other shareholders are separately backing a rival plan led by Olivant, the private equity group headed by Luqman Arnold, the former Abbey boss, which wants to run the bank as a going concern. Meanwhile, Sir David Walker, who recently authored private equity guidelines, warned that London’s reputation as a financial centre has been damaged by the Northern Rock crisis.
The day of reckoning for private equity in the UK – but a day that may be less traumatic than some in the industry feared.
The final recommendations of Sir David Walker have been watered down since his initial consultative document, published in July, to reduce the disclosure suggested for individual firms and to allow them more time to produce annual and interim reports for their portfolio companies. Read more
Efforts to persuade the UK’s private equity firms to adopt a voluntary code of practice are likely to gather pace over the next few weeks. Sir David Walker, the former regulator who is drawing up the guidelines, set an October 9 deadline for responses to his consultation document. Like the British code of corporate governance drawn up by Sir Derek Higgs, the private equity code would adopt a “comply or explain” approach. But although the governance code has proved largely useful and robust, the parallels are causing some anxiety among the buy-out firms, mainly because we in the media often lambast companies that fail to conform with the Higgs principles. The fear among private equity partners is that they and their portfolio companies will be dragged through the mud for anything less than slavish adoption of the Walker code on transparency.
So they should be, the critics will doubtless respond. But that is a hasty reaction. Little irritates Sir Derek Higgs more than to hear companies accused of being “in breach” of his “rules”. A board has infringed the guidelines only if it fails to explain why it has not followed the principles. Read more
Private equity firms will be forced to disclose even more sensitive information on their deals – including planned job cuts and financing plans – or risk being “named and shamed”, under proposals by Sir David Walker, who was appointed by the UK buy-out industry to create a code of conduct. Sir David told the FT he was considering “naming and shaming” firms that do not respect his code, toughening his original proposals, published two weeks ago, after politicians said they did not go far enough.
The private equity sector has grown partly because of “the preference of talented executives to work in a business environment without many of the formal constraints of the listed sector”. So says Sir David Walker in his keenly awaited consultation document on disclosure and transparency in UK private equity.
Preventing the talent from running a mile at the first sign of daylight is what makes the Walker report so wordy. Sir David, a former investment banker and UK regulator, has had to wrap his (hardly radical) recommendations in cotton wool, soothing the highly strung buy-out specialists who helped with the report, by implying that their new burdens will be far lighter than those imposed on executives of listed companies. Read more
Private equity needs to become more open, says Sir David Walker in the pre-amble to his report which aims to establish a set of voluntary guidelines for the industry.
Reporting by listed companies, he notes, is a means of addressing the legitimate concerns of groups such as employees, suppliers and customers, as well as the public interest more widely. It is these interests, he suggests, that have been left inadequately informed by the buyout end of private equity. Read more
The UK private equity industry will on Tuesday unveil its first attempt to curb growing criticism with the publication of a review proposing greater financial transparency and improvements to corporate governance which could include appointing independent directors. Sir David Walker, former chairman of both Morgan Stanley International and the Securities and Investments Board appointed by the buy-out industry to propose a code of conduct, will trigger a fierce debate with Tuesday’s consultation paper. Most controversially, he is expected to float the idea of buyout firms appointing external, non-executive directors to the boards of some companies they take over.
Britain’s private equity groups are to provide more information about the businesses under their control in an effort to deflect mounting criticism about the role they play in the economy. The private equity industry’s main lobbying group on Thursday launched a high-profile working group, to be chaired by Sir David Walker, the respected former banker and City regulator, to come up with a code of conduct for disclosure. The creation of the group, supported by private equity houses including Apax, Blackstone, Carlyle, KKR and Permira, comes after a period of intense criticism from politicians, unions and executives over the industry’s financing techniques and lack of transparency. The industry’s response in the UK is likely to be closely watched by groups in the US and elsewhere.