Sir Howard Davies is a worried man. He worries about political polarization. He worries about the long-term impact of Brexit on the City of London. And he worries about the decline of globalization.
One thing he doesn’t particularly worry about is the health of the bank he chairs, NatWest, which in its former form of Royal Bank of Scotland was on the verge of collapse during the 2008 global financial crisis.
Davies has been chairman of NatWest for seven years and the turning point in the bank’s fortunes, he says, was paying a $4.9bn (£3.6bn) fine to US authorities in 2018 for its role in the subprime mortgage crisis. Until then, NatWest was “rushing behind the couch” to find capital, but it is now in better financial shape than many comparable European banks and has been able to expand. It was, he said, “a two-half game”.
The football metaphor is telling because Davies has another concern. As a lifelong Manchester City fan, he fears his side could be propelled to the Premier League title by Liverpool in Sunday’s final round of fixtures. To mitigate the
Family Married to a deceased journalist. Two wires, one left, one right.
Education Primary Bowker Vale; Manchester High School; Memorial University of Newfoundland; Merton College, Oxford; Stanford Business School.
Pay “The usual answers are ‘enough’ or ‘no comment’, but £750,000 is posted to NatWest’s accounts.”
Last holidays Cycling along a section of the Rhine route. “One day I will finish it.”
Best advice ever given “Always show that you can do your boss’s job if needed.”
Biggest Career Mistake “Agreeing to be director of the LSE. It ended in tears.
Word he abuses “Guardiola, as in ‘we have Guardiola’, sung to the tune of Glad All Over.”
how he relaxes Playing cricket and listening to pianist Brad Mehldau: “Usually not at the same time.
potential agony, he went £100 8-1 over Liverpool, adding the title and Champions League to the FA and Carabao Cups they have already won.
It’s an ’emotional blanket’, he admits, referring to a half-century career in which he worked at the Foreign Office, the Treasury and the Bank of England, and was the chief regulator British financier, chief executive of the CBI, management consultant and head of the UK airport capacity survey.
When asked which of his many jobs he enjoyed the most, he chose none of the above, but chose to head the Audit Commission (subsequently axed by David’s government Cameron), which examined whether local authorities were getting their money’s worth.
“It was fascinating work. I found you could make significant improvements to local services, where the variations were absolutely huge. It was really interesting and rewarding, and you could really see that you were making a difference.
Far less pleasant was the end of Davies’ tenure as head of the London School of Economics after concerns were raised over the school’s decision to accept funding from a foundation controlled by Davies’ son. Muammar Gaddafi.
Davies says he never asked for the money himself and thought there was something wrong with the arrangement, but agrees he should have spotted the potential for trouble. “There is no doubt that I made a mistake. I should have stopped and I didn’t.
His latest project is a book – Chancellorspublished by Polity Press – on the Treasury’s role in managing the economy under all chancellors, from Gordon Brown to Rishi Sunak.
Davies was appointed head of the Financial Services Authority by Brown when oversight was split from the newly independent Bank of England in 1997, and he was later criticized for failing to clamp down on the City sufficiently during the build-up to the crash in 2008. “At the time, people were complaining that financial regulations were too strict and that I was judge and jury in my own court,” he says. “I have been accused of being too powerful a regulator who interfered with ‘animal spirits’. There has never been criticism the other way.
Asked which of recent chancellors he has the most time for, Davies chooses Alistair Darling, whose three years at the Treasury between 2007 and 2010 were dominated by the banking crash.
“Alistair had a terrible hand to play. He had no money, a financial crisis and his predecessor as boss. There was nothing Alistair knew that Gordon didn’t. Yet he was completely unfazed.
When he began writing the book, Davies was convinced he would conclude that the Treasury should be divided into separate financial and economic departments, the model preferred by most other European countries. He has since changed his mind. “A bit of checks and balances in our system is a really good idea,” he says. “If we divided up the responsibilities and had an economic affairs department and a budget ministry, they would be less powerful separately than the Treasury is together and that would give No 10 carte blanche. It would be a mistake.
“This Prime Minister hated the Treasury partly because of his pro-EU views, or his perceived pro-EU views, and his role in the referendum. But when he found himself in a hole, who else but the Treasury could bail him out?
While Davies is optimistic about NatWest’s prospects, he is less optimistic about what the future holds for the UK. “I’m quite pessimistic actually. Brexit was a big mistake. You don’t solve the problems of the left behind by damaging the only part of the country that writes the checks. London pays large amounts of tax and will be damaged by Brexit over time.
“I worry about political polarization. The same is happening in France [Davies teaches in Paris] and in the United States. It may be less bad here than in the United States or France, but I feel a kind of bitterness in public life that does not create a good environment for rational solutions to problems.
Davies says when he first arrived in London from Manchester in the 1970s, the capital was “dark” and “monochrome” but has since become a vibrant multiracial city. He fears that the pendulum may now swing the other way. “China is separating from the United States and there is this war [in Ukraine]. London has benefited from globalization and if it reverses, perhaps the global city is past its prime.