Hester's successor: the runners and riders emerge

With seven figure salary, job hardly a "thankless task".

A successful sell off the State’s shareholding in Royal Bank of Scotland (RBS) seems further away than ever. The RBS share price continues to tank. RBS shares kicked off the year at around 366p each; today they are down to 288p, down 23 per cent for the year to date, the worst performing UK banking share. Take a bow Mr. Osborne.

Since his latest RBS comments at the Mansion House speech on 19 June, the share price has fallen by more than 30p. The kindest interpretation of the Chancellor’s intervention in the past 10 days relating to the future of RBS is that he has created fresh political confusion. Encouraging the RBS board to dispense with Stephen Hester prematurely did little in the short term for the RBS share price.

Just to really put the boot in, Osborne then performed a U-turn of stunning proportions by saying that he would examine a good bank/bad bank split at RBS. This proposal was one that Osborne had argued against consistently despite strong arguments in its favour from such distinguished advocates as Mervyn King and Lord (Nigel) Lawson. If such an argument had merits – and it had three year ago – that time has passed.

A period of silence from Mr. Osborne concerning RBS would be welcome for the foreseeable. Meantime, keep a close eye on possible obfuscation relating to the share price that the government requires to obtain to break even on its RBS share acquisition. The UK government currently holds 81.14 per cent of shares in RBS, having injected £45.5bn. The average government buy-in price was 502.26p.

According to RBS, the break-even price has dropped to 440.6p, taking into account fees that RBS has paid to the government. This does not however take inflation into account. A more accurate breakeven figure would be somewhere about 470p but the RBS website continues to promote the notion of 440p as the magic figure.

One thing that the Chancellor could do by way of damage limitation would be to encourage an acceleration of the process to appoint Stephen Hester’s successor. The RBS board does not have to look too far for the standout candidate. The bank has reportedly engaged the doyen of City headhunters, Anna Mann, co-founder of blue-chip consultancy MWM, to recruit Hester’s replacement. MWM certainly has form: it has recruited 16 of the current CEOs of the present FTSE 100. Ignore the guff in the press about the CEO of RBS being a thankless task.

The job carries a seven figure salary, generous bonuses and guaranteed recognition in a future Honours List for successful execution. The latest odds, courtesy of Ladbrokes, suggest that Chris Sullivan, RBS chief executive of corporate banking, is the favourite at 9/4. Nathan Bostock, RBS’ head of restructuring and risk and the early front-runner – Ladbrokes quoted him as short as 1/2 last week – has drifted like a barge out to 3/1. National Australia Bank Group CEO Cameron Clyne has attracted support and has been backed into 4-1 from an initial show of 6-1. As Investec analyst Ian Gordon argues today in a note to clients, Ross McEwan, CEO, UK Retail at RBS is a stand-out choice. This time last week, his odds were a generous 20-1. This morning, his odds have tumbled to 8-1.

Last Wednesday, just ahead of George Osborne’s Mansion House speech, I asked a group of senior bankers attending a meeting of The Digital Banking Club I was chairing, to name what they reckoned was the world’s leading retail bank. There was strong support for Royal Bank of Canada – a view with which I concurred by the by. Interestingly, the CEO of Royal Bank of Canada, Gordon Nixon, is quoted at 16/1 to succeed Hester.

But the retail bank currently most admired in my straw poll last week was Commonwealth Bank of Australia. Much of the credit for CBA’s current success can be attributed to the work of Ross McEwan. McEwan joined RBS in August last year from CBA where he was Group Executive for Retail Banking Services for 5 years.

If Osborne has to interfere again in the running of RBS – on balance it would be better if he did not – he could do worse than give a nudge to the RBS chairman and to his expensively engaged headhunter – to view McEwan as a worthy successor to Hester.

Hester ousted: who's next? Photograph: Getty Images

Douglas Blakey is the editor of Retail Banker International

Photo: Getty
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Britain cannot shirk its duty to defend Hong Kong from China's authoritarianism

Arrests of pro-democracy activists show China is breaching its commitments to the “one country, two systems” agreement.

When Chinese Foreign Ministry spokesman Lu Kang said in June that the Sino-British Joint Declaration no longer has any “practical significance”, shivers were sent down the spines of those who want democracy to flourish in Hong Kong.

“It is not at all binding for the central government's management over Hong Kong. The UK has no sovereignty, no power to rule and no power to supervise Hong Kong after the handover,” he said.

Going by the British government's failure to respond firmly to the jailing of Joshua Wong, Nathan Law and Alex Chow for standing up for democracy, it appears the UK agrees.

The Sino-British Joint Declaration, signed in 1984, was committed to the “one country, two systems” principle, making Hong Kong a Special Administrative Region of China but ensuring a range of freedoms, which future British governments would ensure were upheld.

China’s creeping influence over Hong Kong’s legal affairs and freedom of speech are not new. Earlier this year, Amnesty International said the human rights situation in Hong Kong was at its worst since the handover in 1997. That assessment followed the disappearance of five Hong Kong booksellers, later found to have been in the custody of the Chinese police, with one describing having been blindfolded and kept in a tiny cell. In other instances journalists have been attacked by police. 

But in Hong Kong, resistance is on display in familiar scenes on the streets. Tens of thousands of people have marched through the financial and legal hub in protest at the jailing of the three pro-democracy activists for their role in the Umbrella Revolution in 2014 – a fundamentally peaceful movement.

It was a moment where people came out to fight for universal suffrage, which I continue to support as key to safeguarding the island’s stability and prosperity (and something Hong Kong’s Basic Law secures by stating that the chief executive should be selected by “by universal suffrage upon nomination by a broadly representative nominating committee in accordance with democratic procedures”).

For showing courage in fighting for universal suffrage, Wong has already served 80 hours of community service and Law 120 hours. Chow received a three-week suspended prison sentence a year ago. Yet now Wong has been jailed for six months, Chow for seven months and Law for eight months.

Wong was even summoned again to court today for an ongoing contempt charge related to the 2014 "Occupy" pro-democracy protests.

Perhaps more importantly, Wong is now not eligible to stand for the legislative council for five years due to his six-month jail sentence, while Law, who was a member of the council, was removed from office.

This all comes after a 2016 order from Beijing for Hong Kong’s government to dismiss officials thought lacking in their allegiance to China, which led to six legislators being banned from holding office.

Many, including Hong Kong’s last Governor, Chris Patten, have suggested Wong, Law and Chow's sentences were a deliberate attempt to prevent them from taking on these legislative positions.

Patten added that he hopes friends of Hong Kong will speak out, having previously written the UK is “selling its honour” to secure trade deals with China, letting down pro-democracy activists who have been trying to fight to maintain freedoms that were guaranteed during the deal that ended over 100 years of British rule.

The prising open of the case by the Hong Kong government to push for tougher punishments reinforces concerns about Beijing’s willingness to interfere in Hong Kong’s democracy. As Amnesty International stated, seeking jail terms was a “vindictive attack” on freedom of expression.

China’s enthusiasm for subverting democracy has recently been on show in its attempts to censor Cambridge University Press (CUP), which initially complied with a Chinese request to block access to more than 300 articles from the China Quarterly, a leading China studies journal, including articles on Chairman Mao’s Cultural Revolution and the Tiananmen Square Massacre. Following public pressure CUP have now reversed their position.

But while freedoms granted under the Joint Declaration may have contributed to Hong Kong becoming fertile ground for those supportive of democracy and critical of China, it does not free the United Kingdom from its responsibility to uphold the “one country, two systems” principle, which promises extensive autonomy and freedoms to the island, except in the area of foreign relations and military defence.

Read more: The dream deferred by Chris Patten

The Joint Declaration is a legally binding treaty. It is registered with the UN and is still in force. As the UK is a co-signatory, it should be doing all it can to make sure it is upheld.

Yet, in late June one of Hong Kong’s most respected democracy activists Martin Lee described the British government as "just awful. I’m afraid I cannot find any kind words to say about that.”

It is not for either China or the UK to unilaterally decide the Joint Declaration is null and void. The people of Hong Kong understand that and are standing up for democracy in the face of adversity. Our Government has a duty to stand by them.

Catherine West is the Labour MP for Hornsey and Wood Green