ALEX BRUMMER: The FCA must get disgraced HBOS execs banned from the Square Mile to prove its worth

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Rising star: FCA caretaker boss Tracey McDermott

Five months have passed since the City’s top regulator Martin Wheatley unceremoniously left the Financial Conduct Authority (FCA), having let the side down with some unfortunate briefing about the probe he was considering for Britain’s life and pensions companies.

In the vacuum his interim replacement Tracey McDermott, head of enforcement, has shown real signs of becoming a robust regulator of the kind the City really needs.

This in spite of the fact that she has been kept in limbo for far too long and has to work under a chairman in John Griffith-Jones whose former accounting firm KPMG has been found wanting at the Co-op Bank, FIFA and HBOS.

McDermott is working hard to earn a better image for the FCA. 

The latest strike is against five wealth managers who so badly failed clients they could face fines and be compulsorily restructured.

It is a hugely important finding given the sector manages an estimated £600billion of other people’s money. 

The great weakness in the probe is that instead of naming and shaming the culprits the FCA is leaving citizens in the dark as to who the alleged offenders are.

This gives rise to a potentially misleading guessing game.

What we do know, however, is this time the alleged culprits are not the big banks but are thought to be drawn from a second tier of wealth managers.

It may or may not include the Queen’s bankers Coutts, which in the past has faced fines for wrongful selling of complex financial products and inadequate money laundering controls.

This week the FCA, after some doughty campaigning by this paper, forced the banks to own up to customers about the lousy returns being offered on savings and deposit accounts.

Already this autumn McDermott launched an inquiry into the high charges some UK active fund managers make for performance which is no better than routine.

One won’t be entirely convinced of the FCA’s effectiveness until the ten or so former executives of HBOS, including chairman Lord Stevenson, and former chief executives James Crosby and Andy Hornby, are at the very least banned from ever working in the Square Mile. If McDermott could pull that off she would deserve not just the top job but a damehood.

Combustible mix

The coming together of two giants of the US chemicals industry, DuPont and Dow Chemicals will be hailed as a wonderful thing.

But the deal, creating a $120billion behemoth, will destroy more value than it creates.

It will be seen as another triumph for activist investment with Nelson Peltz, the driver of Kraft’s disastrous takeover of Cadbury, and another super-rich investor Daniel Loeb pushing the transaction. It will push the value of takeovers in 2015 up to a record $4.7billion.

Peltz and Loeb may well be onto something in believing the two ex-growth chemical giants are no longer fit for purpose. 

The pacier life sciences activities might well prosper away from old industrial chemicals in the same way as Syngenta and AstraZeneca did when they were demerged from ICI.

But the process is a curious one not dissimilar to what happened to Cadbury. The intention is to create a chemical giant and then spin off the more innovative and growth parts into separate companies.

This is what Peltz encouraged at Cadbury, first merged into Kraft, and then demerged as Mondelez.

It is financial engineering at its most crude, rewarding investment bankers and sharp Wall Street investors but paying very little attention to the underlying business, long-term funds, R&D, heritage or the workforce.

Mergers on this scale create IT and management problems because it is easy things, such as closing down corporate headquarters, that are fixed.

Full integration seldom takes place. Better that the two firms split off their speciality activities including agriculture, special chemicals and materials distributing the value to loyal investors before thinking about aggrandising deals.

Merging to demerge is industrial vandalism.

Old boys

IT has been a good week for former Chancellors with Alistair Darling gaining a seat on the board of investment bankers Morgan Stanley. 

Darling played a key role in calmly steering the UK through the great financial crisis and in stopping Barclays from rescuing Lehman Brothers.

Earlier this week Gordon Brown emerged from the darkness to join the glamour crowd in the advisory board of Pimco. Poor old Vince Cable is having to settle for the Hampshire Community Bank.

The rush of former Labour chancellors to join Mammon might be seen as chutzpah given their tolerance of Fred Goodwin and others in the run-up to crisis.