Well all you digital alt lending disruptors, watch out the Americans are coming! Couldn’t help but have a chuckle at this one. Apparently JP Morgan has appointed a high flying techie from its investment banking operations to be the CEO. We have of course been here before with our American cousins thinking that they can do it much better than we can. But they never quite made it largely, I think, because of the almost neurotic loyalty that UK banking client base displays to the established players and the very un-level playing field created by the Financial Conduct Authority. It is against this unpromising backdrop that the revolutionary achievements of UK start ups Starling Bank and Revolut need to be measured. I also note from the article that the Jobs for the boys ethic that has forever pervaded the City of London is alive and well. The Chairman of the new JPM entity is going to be one Clive Adamson ex FCA himself and this leads me on to the next item.
As reported in this column last week the struggling Co-op bank has received a bid from US private equity house Cerberus. Co-op’s USP is that it is an “ethical” bank and the juxtaposition of this entity to the practices of Private Equity seems to have upset the sensitivities of Tory MP Kevin Hollinrake who co-chairs the All-Party Parliamentary Group on Fair Business Banking. Calling Cerberus a “Vulture Fund” he has urged the BofE to intervene. Apparently Cerberus has form with the UK government having allegedly misled the government over the purchase of a £ 13 billion mortgage portfolio from Northern Rock back in 2018. Cerberus has always denied any wrongdoing. Nevertheless it just shows how upsetting someone can always come back to haunt you. Cerberus portrays itself as a turnaround specialist and the Co-op banks troubles stem partially to the 2013 appointment of a particularly unsuitable candidate as Chairman. Known colloquially as the “ Crystal Methodist “ because of the unlikely combination of being both a Methodist Minister and a Crystal Meth user this appointment was waved through by the FCA despite the candidate not knowing anything about either the bank of banking in general. I was told at a dinner at the Irish Embassy in London some 6 years ago by my dear friend and late ex banking bon viveur Martin (Jocky) Russell that it was the aforementioned Clive Adamson, who was known personally to both of us, that was at least partially responsible. There is a health warning on this as Jocky was a terrible gossip?
I briefly touched on this last week but the article this week puts quite a lot of flesh on the bone and I think highlights the principal reason why the Fintech community should take notice. The Sainsburys franchise is a really strong one. They have 23 million largely loyal clients who use their retail outlets each week. The trust and belief is already there. Logically they should be able to leverage this into financial services but the client count is a mere two million and it is up for sale. Sainsburys states a number of reasons why they failed but bad management is not one of them although there are strong contributory factors which have been outside of their control including ultra low interest rates, spiralling costs etc etc. But Clive Black an analyst at Shore Capital hits the nail on the head when he states that the regulator made it difficult to transfer bank current accounts and that is where most salaries are paid into. Without that you are doomed to failure and relying on once in a while transactional one offs. Unless this changes substantially then I fear that we will continue to see the big banks continue their dominance. The FCA is guilty here. It has stifled real competition and therefore harmed the people it is supposed to represent. The innovators should work on removing the FCA logjam and bureaucratic mindset. Account Transfer Technology ought to be the solution.
Howard Tolman is a well-known banker, technologist and entrepreneur in London,
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