Editor’s Notes: MPs should summon the hedgies to understand Carillion
In their quest to find out what happened to doomed outsourcing giant Carillion, MPs are asking the right questions but they’re not necessarily addressing them to the right people.
This week the committee investigating Carillion’s collapse grilled accountancy firms KPMG and Deloitte, but while the beancounters can provide valuable insight into the final hours of Carillion’s life, it wasn’t their job to save the business. MPs keep asking the auditors what they did to stave off disaster, but it simply isn’t the role of external accountants to sort out a client’s corporate woes unless they’re specifically asked to.
Long investors were questioned by MPs last week, but most simply blew off steam – having lost money on a poor investment. The only exception was Standard Life Aberdeen, who were happy to highlight their decision to start selling down their position from 2015.
Unlike other investors who held out, they could see what was happening and didn’t like the look of it. In effect, they were shorting the stock. This brings us on to the hedge funds – the only characters of this sorry story that haven’t been summoned by MPs. If the committee chose to invite this collection of short sellers they would find the encounter illuminating.
Read more: KPMG says Carillion bosses were wrong to pin blame for collapse on Qataris
After all, the main question they’ve asked of Carillion executives, regulators and auditors is “why didn’t you see this coming?” The hedgies did, and were rewarded to the tune of tens of millions of pounds.
At one point, Carillion was the most shorted stock in Europe. Hedge fund managers may be a notoriously private bunch, but a parliamentary summons would help MPs get their heads around the financial back story of Carillion, and would have the added bonus of seeing some of the most secretive players in the market asked to explain how the magic works. That would be worth tuning into, and may give the politicians some answers.
RBS's robot will help it keep standards high
Royal Bank of Scotland has put itself on the front foot by unveiling a “digital human” who will help online customers with basic questions such as “what do I do if I lose my card” or “will I get compensation after RBS crushed my business in its controversial restructuring group?” OK, I doubt it will have an answer for that last one, but amid fears that artificial intelligence will develop the capacity to harm us let’s hope the RBS engineers make sure Cora can’t fake anyone’s signature on a loan application or cook up dodgy profit factories such as the one which was finally laid bare in all its gory detail this week after MPs released a report into the bank’s Global Restructuring Group. This unit operated from 2005 to 2013, and was found to have practiced “widespread inappropriate treatment” of the struggling RBS clients who ended up in it. The bank stresses that its culture and processes have fundamentally changed. Let’s hope Cora can maintain high standards.
Read more: MPs publish full "disgraceful" report into RBS' "profit centre" GRG
Threadneedle showdown with Carney's catty comment
There was an awkward moment in Westminster on Wednesday when MPs grilled Bank of England governor Mark Carney and his chief economist, Andy Haldane – who made a thoughtful case for the economic benefits of currency deprecations, only for the governor to explain why he was wrong. This was in public, so imagine their exchanges in private. Carney is due to leave in 18 months, though he teased us (and possibly Haldane) by offering a piece of advice while giving a speech on leadership on Tuesday: “Leave before you’re asked.” Hmmm…
Read more: Mark Carney says these are the three things good leaders must do
Green vs the press
Sir Philip Green remains one of the business world’s most unorthodox characters, having waited nearly 48 hours to comprehensively debunk reports that his Arcadia group was up for sale. Normally, the subject of such a story would seek to either confirm or deny pretty quickly, but there’s nothing normal about Green’s approach to dealing with the press. When he finally released a statement it was mostly a personal attack on the integrity of the journalist who broke the story.
Read more: Green questioned on his retail empire, but he denies sale is taking place
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