London Briefing: Some testy moments for Bank of England hopeful
Andrew Bailey may be the bookies’ favourite but he is not the only well-qualified candidate
‘I don’t get up in the morning hoping that people will love me,’ Andrew Bailey replied when asked whether it was better to be feared than liked or loved. Photograph: Reuters
The bookies’ favourite as the next governor of the Bank of England managed to withstand a grilling from MPs on Tuesday without doing too much harm to his chances of getting the top job at Threadneedle Street.
The Woodford meltdown was the main item on the agenda for Andrew Bailey as he faced questions on the workings of the City regulator, the Financial Conduct Authority, which he heads.
Members of the Treasury Select Committee – a couple of whom had the misfortune to have put money into Neil Woodford’s fund – were keen to find out whether Bailey was, as his critics have claimed, “asleep at the wheel” as the fund slithered deeper into difficulty.
Bailey insisted it was a failure of rules rather than regulation, saying there were flaws in the rules surrounding collective investment funds such as Woodford’s that resulted in the regulator not being given a complete picture.
Link Fund Solutions, the authorised manager of Woodford’s now-suspended £3.7 billion (€4.1 billion ) flagship fund, was “using those rules to the full”, Bailey said.
There were some testy moments, such as when committee chair Nicky Morgan asked whether anyone at the FCA actually read the newspapers, which had been flagging problems at Woodford’s funds for some time. Yes, they did, he replied.
Quizzed on complaints
But Bailey hit back when quizzed on complaints that investors were left uninformed about what was going on in the fund, revealing he had spent a Sunday afternoon on his computer checking its investments on the internet. “It’s not difficult to find out what’s in the Woodford fund,” he told MPs.
Bailey was keen to demonstrate he could take the heat, of which there has been plenty recently, with no sign of letting up any time soon.
“I don’t get up in the morning hoping that people will love me,” he said, when asked whether it was better to be feared than liked or loved. As for suggestions he was “too nice” to bankers, Bailey unsurprisingly begged to differ.
While the FCA chief acquitted himself reasonably well in Westminster yesterday, it’s by no means certain he’ll be anointed as Mark Carney’s successor when the Canadian banker steps down in February.
UK chancellor Philip Hammond has let it be known that rather than rush through a decision in the dying days of Theresa May’s administration, he’ll leave what will be a highly political appointment to the incoming prime minister,
Bailey is not the only well-qualified candidate. Others are thought to include current deputy bank governors Jon Cunliffe and Ben Broadbent. Raghuram Rajan, former governor of the Indian central bank, is also thought to be in the running and possibly even Janet Yellen, the former Fed chair.
Should Boris Johnson still manage to win the leadership race despite his current difficulties, who knows what sort of whacky names might yet be added to that list. Indeed, it’s quite possible he’s already offered the job to at least half a dozen different people.
Clearout fails to materialise
The threatened boardroom clearout at rail and bus operator FirstGroup failed to materialise on Tuesday but activist shareholders still claimed an important scalp, that of chairman Wolfhart Hauser.
Just minutes after announcing that shareholders had rejected proposals from the US hedge fund group Coast Capital to oust half the board, including the chairman, FirstGroup issued a further statement revealing that Hauser had decided it was now “time for me to move on”.
It wasn’t the total victory the activist investors wanted, but it will serve as a consolation prize for Coast Capital, which has waged a bitter war of words against the transport group, repeatedly accusing directors of bad management and lacking experience in the transport industry.
Coast wants FirstGroup to get rid of its loss-making rail operation, which includes Great Western Railway, South Western and the TransPennine line. It also runs one in five of the UK’s buses and, in the US, owns the famous Greyhound coach line and school bus services.
With about 10 per cent of the shares, Coast Capital is FirstGroup’s largest shareholder. Hauser’s fate looked sealed, one way or the other, on the eve of Tuesday’s meeting when institutional shareholders Columbia Threadneedle and Schroders joined Coast in calling for him to step down.
FirstGroup last month unveiled its own breakup plans, proposing to sell Greyhound and its UK bus operation. The City is not convinced of the strategy – and neither is Coast Capital. Having seen off Hauser, the US hedge fund won’t give up the fight now.
Fiona Walsh is business editor of theguardian.com