When he could get a word in edgeways amid the screeching of chairman John McFall, the Rock’s weary-looking chief executive Adam Applegarth put up an impressively solid defence of the bank’s lending and borrowing policies, as he faced repeated accusations that it had adopted a dangerously aggressive strategy.
There was nothing the Rock could have done to mitigate the risk, the chief exec insisted. It had deliberately slowed its new lending and started selling higher-risk assets to cope with the tightening of the credit markets, while also diversifying by geography and product type. It had even stress-tested for all manner of scenarios (including a 40% drop in house prices) – but not for the ‘unprecedented and unforeseeable… rapid and long-lasting closure of global markets’.
Instead, he seemed to suggest the Bank of England should carry the can (though he refused to say so explicitly). If a covert lending facility had been available, as it was in the US and Europe, the run wouldn’t have happened. If the last resort facility had been extended to the unnamed high street bank offering a ‘safe haven’ prior to the news being leaked, allowing an offer to be made, that could also have averted the run. But by the time this happened it was too late, he said.
The committee seemed preoccupied with the original leak of the Bank’s ‘lender of last resort’ facility to the BBC, four days before management were planning to announce it (and before it had even been signed) – but Applegarth was phlegmatic. The leak didn’t help, but he didn’t blame it for the subsequent panic by the bank’s customers.
The problem was the whole ‘last resort’ angle, he suggested. ‘I’d have probably done the same thing if I was in their shoes’, he admitted. And he has a point – the title doesn’t exactly inspire confidence, does it? Perhaps the Bank of England needs to spend a few hundred thousand pounds on getting some marketing experts to do some re-branding here…
All four Rock representatives – including bewildered-looking chairman Matt Ridley (who must be wondering what his father let him in for) and non-execs Sir Ian Gibson and Sir Derek Wanless – looked like men who have suffered a hefty blow to their hard-won reputations in the last six weeks. But the likeable Applegarth did make a good fist of what was always going to be a thankless task – which is a good thing, because he’ll almost certainly be job-hunting before too long.