The new face at the FCA needs to keep politicians at arms length | Nils Pratley


Nikhil Rathi, appointed on Monday to be chief executive of the Financial Conduct Authority, offered a long list of his plans for the job – everything from creating a more diverse organisation, to looking out for vulnerable customers to helping tackle climate change. All are fine ambitions, but here’s another for Rathi to consider: rid himself of the unhelpful tag that’s he a “Treasury insider”.

Why? Well, Brexit could expose tensions between the Treasury and the chief financial regulator as never before. Remember the misguided (and failed) effort to woo Saudi Aramco to list on the London stock market by promising a change in the rules?

It was an unedifying episode at the FCA during the reign of Andrew Bailey, now governor of the Bank of England. Politicians wanted a high-profile “open for business” win for the UK and regulators were seemingly happy to swallow the script, in the process undermining long-established governance requirements for a “premium” listing in London.

Rathi, of course, will know the details. He arrives from the London Stock Exchange itself, having previously spent five years at the Treasury from 2009-14. He would do well to put distance between himself and both former employers. The FCA’s focus on higher market standards needs to be single-minded.

To see how not to do the job, look at Germany. The London financial market (while applauding brilliant investigative reporting by the FT) is currently laughing at the German display of regulatory capture at Wirecard, the scandal-hit payments processor that on Monday said its missing €1.9bn (£1.7bn) probably doesn’t exist. Almost unbelievably, BaFin, the German financial regulator, had backed Wirecard, to the sound of political cheering.

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London, though, shouldn’t feel too superior. It is only four months since a FTSE 100 company disappeared in a cloud of related-party transactions and undisclosed debts. That was Abu Dhabi-based NMC Health, where we’ve yet to hear the full account of how the FCA responded to warnings. Investor confidence in UK regulation was undoubtedly damaged by NMC. It would be damaged further if departure from the EU is followed by looser regulation. Financial regulation can be different – but weaker would spell long-term trouble.

Rathi’s career, including a stint at the Treasury on international financial regulation, should have given him all the technocratic experience he needs. He is also extremely clever, according to one former minister. He looks an excellent appointment. Now keep the politicians at arm’s length.

Will the British Gas X factor steal the show?

In Centrica’s position, you’ve got to try something new. The energy price cap, plus many strategic mis-steps, have hammered the share price to the the point where the owner of British Gas is no longer a member of the FTSE 100 index.

Here’s new chief executive Chris O’Shea’s new idea – a “challenger” brand that will copy the approach taken by cheap ’n’ cheerful newcomers to the retail energy market. So online-only accounts and no messing around with trying to flog smart thermostats and boiler repair contracts to the punters.

It’s worth a go, but the unexplained part is how British Gas X – the working title for the new operation – won’t merely advertise the higher prices of the main operation. The duo will not be competing for the same customers, argue insiders, which sounds a tad hopeful. British Gas still has 23% of the retail energy market. If the new offshoot is to succeed, it surely has to pinch more than a few of those customers.

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Explanation, please, JD Sports

JD Sports is a FTSE 100 company worth £6.3bn – indeed, it’s one of the most successful retailers in the land. It should, therefore, be able to take a long view of the current downturn.

That’s its plan with its core business, but administrators are being lined for its wholly-owned subsidiary, Go Outdoors, a camping, cycling and hiking specialist with 67 stores and 2,300 employees.

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The administration button has not yet been pressed and JD says it has considered “a number of strategic options”, so it looks as if the plan is to keep control of a smaller Go chain. But, if restructuring is the aim, why the need to file a notice of intention to appoint administrators?

Landlords (and employees) have the most to lose. They might reasonably wonder if the administration process is really designed to allow a prosperous FTSE 100 company to shed stores in a hurry. JD Sports’ explanation on that point is awaited.



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