01 September 2016
Furling the Umbrella
A banking scandal not worth the mention
by J.R.Thomas
Strange goings on at Lloyds Bank. Once the smallest and most conservative of the big Four UK clearing banks, and certainly always the most careful and cautious, especially in relation to any novelty such as technology, it was also one of the most old fashioned, in business, in innovation, and in ethical standards; the ultimate in black brollied and bowler hat type banking.
When the crash of 2008 reduced other great banks to shaking wrecks, Lloyds looked as though that conservatism had stood it in good stead. Costs were lower, and the bank had grown much more slowly than its aggressive competitors. The Black Horse, logo of the bank for over three hundred years – long before banks had logos – continued to figure largely in its advertising, a symbol maybe of a calmer, slower, approach to banking. That conservatism had extended to lending policy as well. Lloyds liked to deal with people it knew, in sectors that long experience had taught it were lower risk, and on terms where it was a lender and not a partner (a distinction that became increasingly lost on some of its competitor banks).
So Lloyds looked as though it would be the great survivor; adequate capital, lower loan loss provisions, lower costs, high quality customers, and, in Eric Daniels, an accomplished CEO who had guided the bank well in the enormous footsteps of his predecessor, Sir Brian Pitman. And so it would have been, if the then Lloyds Chairman Sir Victor Blank had not got into a conversation with newly elevated Prime Minister Gordon Brown, at, so rumour suggested, a cocktail party (oh, the dangers of chatting at cocktail parties). Whether it happened at a cocktail party or not, Mr Brown suggested that it would be very helpful if Lloyds could help the government clear up the smouldering mess known as HBoS, the strange outcome of a merger of Halifax, a Yorkshire based mortgage and consumer finance business, with Bank of Scotland, an old established but undercapitalised Scottish bank. It had been a short lived union brought down by what bankers politely call “aggressive lending strategies”. Why Sir Victor and Mr Daniels agreed to it, we don’t know, but they bought HBoS and tried to sort it out. It was not a problem capable of a solution and the government ended up having to resolve the consequent disaster by injecting large amounts of public money. However, whilst its similarly busted Scottish rival Royal Bank of Scotland – no relation – has seemingly proved incapable of salvation, Lloyds HBoS (bankers are not overly good at thinking of snappy new names to stick over their front doors) took the deep immersion cure (including terminating the careers of those dealmakers Blank and Daniels) and came up renewed – so much so that the government has been able to profitably sell large parts of its stake.
There are several reasons for that, but one of them was the appointment of a new chief executive, Antonio Horta Osorio, who is what bankers like to think of as a banker’s banker. He had a career history of great distinction: Citibank; Goldman Sachs; Santander, becoming chief executive of Santander UK in 2006. He steered Santander through the recession, gathering up and sorting out the tottering remains of two failed ex-building societies as he did. That got him a place on the Court of the Bank of England – no greater honour is there for any banker. Finally he was chosen to gallop to the rescue of Lloyds Banking Group (the HBoS bit being carefully hidden behind a filing cabinet somewhere).
There, he has been a major success – a strong leader, who can carry his team with him by persuasion and not by terror or throwing things at them (not unknown in the recent past of some banks), with an ability to concentrate on the essentials and not get bogged down in detail, yet with a quick grasp of all that matters. And a human figure too. After about a year in the job he went down with nervous exhaustion. Normally in the City that is only admitted when the poor sufferer is removed in a special ambulance, leading to career termination and redeployment to a carpentry business in the Brecon Beacons to spend “more time with his family”. Not so Mr Horta Osorio, who publically disclosed his illness, discussed the implications, and took a couple of months off. He recovered and came back. His admission and openness were praised by many for having opened up a matter previously dealt with awkwardly and often cruelly; the City’s handling of mental health issue has been changed as a result of his (and others’) examples. In spite of having to make some tough decisions, including firing a lot of people, he has remained as popular with his staff as tough leaders ever can be. He turned down his bonus for the affected year and said he would only take bonuses when his contribution was clear and the group results showed it. The man is almost a saint!
Or was, until he was outed by various tabloid newspapers a couple of weeks ago, concerning allegations of time spent with a lady not his wife at a conference. There is no suggestion of any conflict of interest or financial impropriety. You may have seen the details or you may not; you may even think that what a man does in his private life, what the nature of his private relationships are, is nothing to do with anything if it does not affect his ability to run the business. You may well be right, and given his success in running Lloyds, you might think his colleagues would be similarly robust. Not so his chairman, Lord Blackwell, a businessman, former academic, and Conservative politician. He summoned Mr Horta Osorio and told him to apologise to the public, the bank staff, and investors. The suggestion is that Lloyd’s standing in the world has been hurt by their chief executive’s naughty (or not) behaviour – if only by carelessness in front of a few paparazzi. And, of course, the modern approach after eight years of public hatred of bankers is for any bank board under fire to get a fulsome apology out. Even before they know what the offence is, it sometimes seems.
Mr Horta Osorio has duly apologised, though in tones that suggest he is not entirely clear what he is apologising for, given that any apologies required should be to any who may have been hurt personally by his behaviour, and not to types who feel that the world should only by led by those of saintly demeanour or those devious enough never to get caught. Those who have failed both tests include the Presidents of France and Russia (allegedly), and a former President of the USA. Lower than that we will not go, but we could fill endless daily editions of the Shaw Sheet with salacious details of persons in positions of power and influence, whose standards have fallen below the definition of saintly.
It is an odd feature of human behaviour that even in times of exceptional openness, when almost nothing is sinful or frowned upon, we still set others standards which are difficult to meet; we seemingly delight in falls from grace, whatever the faller’s contribution to our health, wealth, and wellbeing. Private pain and recrimination is bad enough, but how much worse it must be to suffer the endless salaciousness of the media and the uninformed gossip of others, the half-baked attempts to prove some “public interest”, the trotting out of vague moral excuses to justify straightforward nosiness.
It is doubtful whether any harm was done to Lloyds shareholders, staff or customers by what may or may not have gone on at that conference – but it is certain that the public outing has not assisted any of them. Hopefully, everybody will get over it very soon and bankers can get back to the serious business of being boring.
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