14:07, June 20 121 0 theguardian.com

2017-06-20 14:07:03
Nils Pratley on finance  
 SFO has clear public interest in pursuing Barclays case

One idea doing the rounds in the City needs to be knocked on the head. It is the notion that the Serious Fraud Office should have let whatever sleeping dogs there might be lie in the Barclays case.

This argument holds that, whatever went on with the bank and Qatar in 2008, the UK Treasury avoided having to fund another expensive banking bailout, to sit alongside those at Royal Bank of Scotland and Lloyds TSB. Wasn’t that a useful development? Wasn’t Barclays, by avoiding part-nationalisation, better able to support the UK economy in the post-crisis years? Hasn’t the world moved on? Isn’t Barclays, nine years and three chief executives later, a very different organisation these days?

This line of argument misses the point. The Serious Fraud Office wouldn’t be doing its job as a prosecuting agency if it didn’t follow the evidence as it sees it. If it thinks it has sufficient evidence to support charges of “conspiracy to commit fraud and the provision of unlawful financial assistance contrary to the Companies Act 1985”, it is duty-bound to bring it to court.

Alternatively – in the case of the bank, as opposed to the four former executives – the SFO can pursue a deferred prosecution agreement, or DPA, and seek a judge’s approval. It is unclear why a DPA did not materialise in this case, as it did at Rolls-Royce and Tesco in recent months. One can only note that David Green, director of the SFO, has said that companies should not regard DPAs, which were introduced three years ago, as the “new normal” or a default option. He clearly meant it.

But the broader point about the public interest in the SFO pursuing this case seems crystal clear. The fact that the financial crisis of 2008 can feel a long time ago is irrelevant. If Barclays achieved its great escape from nationalisation legally, then it did well. But if the SFO alleges criminality in the bank’s Qatari dealings, the case must be prosecuted. Any other course would encourage the idea that banks and bankers can play by different rules from the rest of us.

Mansion House pleas for a managed Brexit

It’s one thing for colleagues to have a dig at Boris Johnson, but it seems the foreign secretary is now also fair game for the governor of the Bank of England. “Before long, we will all begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption,” said Mark Carney.

Nobody should be surprised: the Johnsonian cake-and-eat-it vision of Brexit is well and truly dead. Reality has dawned in the UK that negotiations with the EU27 will be difficult, complicated and will add an entirely unpredictable element to an economic outlook that is growing murkier as real incomes are squeezed.

The good news in the twin Mansion House speeches was that chancellor Philip Hammond’s felt sufficiently emboldened to make his strongest plea yet for a managed approach to Brexit. “We’ll almost certainly need an implementation period, outside the customs union itself, but with current customs border arrangements remaining in place, until new long-term arrangements are up and running,” he said.

That, let’s hope, marks the moment that talk of leaving the EU without a deal also died. There simply isn’t enough time for the UK to agree a comprehensive trade deal with the EU27 that could be implemented seamlessly in April 2019. The immediate focus must be on the transitional arrangements. The path to that limited goal probably won’t be smooth or gentle either – but the sooner agreement is reached, the better.

Carney makes case for UK euro clearing

Carney, in a different passage in his speech, produced a startling statistic that, let’s hope, is digested by a European commission that is still threatening to demand the right to shift an important part of the City’s business to the EU.

This is the sensitive field of clearing houses – the institutions that stand behind buyer and seller in a trade. When the trade is an euro-denominated instrument, such as an interest rate swap, the commission wants enhanced supervision or, if that proves unsatisfactory, the power to shift business to the EU.

It should concentrate on better supervision if it’s got any sense: it is easy to do and will cause little fuss. By contrast, fragmenting clearing looks hellishly expensive for everybody. In Japan, enforced onshore clearing adds 1 to 3 basis points to costs, said Carney, and 1 basis point in Europe would represents €22bn. That is serious money, to be paid ultimately by households and businesses.