Investigators need to be sharper with decisions

THE Financial Services Authority was rather pleased with itself as it publicly censured the former Iceland Group for misleading the market over its situation and prospects. Its offences took place at the latter end of 2000, before the FSA's full powers came into force. Had Iceland acted in the same way a year later, the authority would have been able to levy an unlimited fine on the company.

Today, the supermarkets chain's senior management team is different and even the name has been changed to the Big Food Group. The FSA admits its investigations take at least a year. Due process has to be gone through and the law is a slow-moving beast.

The market is a lot more nimble. Iceland's founder Malcolm Walker left the group only a few weeks after a controversial share sale, still being investigated by the Department of Trade & Industry.

Public admonitions and limitless fines are powerful antidotes to bad behaviour. The FSA says companies fight hard to avoid having misdemeanours publicised and are keen to avoid shelling out money over misinformation.

However, the time taken to reach a conclusion on each case is a disadvantage. By the time the FSA has completed investigations, companies that were under the cosh will almost always have moved on. Big Food's new management was only too happy to help the FSA. That is little comfort to shareholders who bought or sold at the wrong time.

Board games

ABBEY NATIONAL'S new finance director Stephen Hester is young, clever and sharp-tongued. The appointment of the former CSFB investment banker was said to have been inspired by Abbey's new chairman Lord Burns.

Chief executive Ian Harley has given Hester his full backing, but the arrival of the high-profile 41-year-old will do little for the stability of the Abbey board.

Ambitious executives are already said to have been jostling for position in the boardroom, anxious to replace Harley as soon as he tires of the job or the job tires of him. Hester is likely to put these directors' noses seriously out of joint. Abbey is known as one of the more political banks in the sector but CSFB makes the former building society look like a children's playground.

Investors have become increasingly disillusioned with Abbey National. Hester may boost the group's credibility. His appointment will also boost speculation about the future of fellow executives at the bank.

Director inquiry

LORD Young said this week that non-executive directors serve no purpose. This is the same Lord Young who was ousted as chairman of Cable & Wireless by a coterie of non-executives in 1995.

He and chief executive James Ross were forced out after weeks of acrimonious argument that was felt by the non-executives to be damaging the company and its share price.

Young is a maverick, and the business community has treated his views on non-execs as light entertainment. They will not have that luxury as far as the Government's investigation into the role of non-execs is concerned. Derek Higgs, senior adviser to UBS Warburg, is to chair the inquiry, the conclusions of which could have repercussions in industry and the City.

The Government's decision to look into non-executives follows the collapse of Enron and a number of high-profile British disaster stories, including Marconi. Intriguingly, former Marconi finance director John Mayo was a protege of Higgs when he ran Warburg's corporate finance department. Such friendships will doubtless prove helpful as Higgs undertakes his research.

Wembley woes

THE Government, the Football Association and a succession of financiers have spent more than five years discussing the pros and cons of Wembley national stadium. Now, just when it looked as though Barclays was about to sign on the dotted line and agree to pay for the project, up pops Westdeutsche Landesbank with a secret bid of its own.

The German bank has a habit of pitching for big, high-profile projects. It made a great deal of noise about bidding for Railtrack, post administration, and it provided Bernie Ecclestone with a $1.4bn (£962m) bond issue when other banks failed him.

Barclays was completely unaware that it faced competition for Wembley and is almost certainly spitting blood. Instead it should be rejoicing. The project has been beset with obstacles from the start and even now Barclays has had to spend months crawling over the deal to see if it fits a string of commercial and legal criteria and to ensure there is clarity in the relationship between numerous interested parties.

The British bank says it has been looking at Wembley on a purely objective basis. If the numbers stack up, it says, a syndicate of lenders will club together, under Barclays' leadership and raise the £300m-plus necessary to build the new stadium.

But business finds it hard to be objective about football as evidenced by the very proposal to site a national stadium at Wembley, a location which has little to recommend it apart from nostalgia.

There would be a certain irony in WestLB financing our national stadium. On commercial grounds alone, however, Barclays should tell the Germans they are welcome to it.

Happier hunting ground

IT IS now common knowledge that Lloyds TSB made a serious attempt to merge with Deutsche Bank. Talks took place several months ago but came to nothing. Deutsche was pushing for a dominant role and Lloyds was reluctant to concede, particularly since its stock market capitalisation is significantly larger than the German bank's.

A deal with Deutsche would have exposed Lloyds to all the problems of continental Europe's retail banking market - too many workers, not enough work and old-fashioned labour laws that make large-scale redundancies difficult and profitability elusive.

Lloyds has been trying to find a European partner for years but each attempt ends in failure. There is a yawning cultural and linguistic gulf between the British and continental banking markets that UK clearers have found nigh on impossible to bridge. Lloyds has been the most public about its European ambitions but that does not mean the others have not tried. So far, however, none has been successful.

Royal Bank of Scotland has its stake in Spanish bank Banco Santander Central Hispano but that relationship is unlikely to become any more intimate as the BSCH board is unwilling to relinquish its hold over the group. HSBC recently bought Credit Commercial de France but that focuses on corporate and wholesale banking, rather than the retail end of the market.

All four major clearers - Barclays, HSBC, Lloyds and RBS - have branches dotted through the European Union but their involvement is patchy and the result of a piecemeal organic approach.

Not one clearer has managed to cross the Channel successfully and find a partner, despite the continued belief that the cost savings would be substantial and the cross-selling opportunities vast Perhaps it is time to begin thinking laterally. Europe may have yielded little joy for the banks but the US is a different story. Although it is frequently a black spot for British companies, HSBC and RBS have both bought businesses there and made successes of them.

Lloyds has made much of its desire to expand and the domestic avenues are limited. America is a long way away but at least there is more of a shared business culture and the language is the same.

Allied Irish Banks' £480m currency disaster in Baltimore shows the need for strong local management in faraway places. Certain of the clearers have also come a cropper in the past. If the right directors are on the ground, however, the US could prove a rather more fertile hunting ground than the Continent.

Venture point

ACCORDING to anecdotal evidence, some $55bn (£37.8bn) of new money was raised in the US venture capital market last year. This year, little more than $10bn is expected to be raised.

The difficulties are reflected here. Many institutions that have put money into the sector are anxious to see a return on their investment before providing more cash. They have been seduced in the past by the market's sales pitch, only to find it poses serious risks and delivers serious losses when times are hard.

Even those who have not been burned simply do not have the money to invest. Institutional liquidity is scarce on both sides of the Atlantic and private equity funds have lost much of their appeal.

The upcoming flotations of technology company Detica and retailer HMV indicate that venture capitalists are keen to realise their investments. But prices for Detica and HMV, unveiled this week, show demand for new issues is subdued.

Lacklustre appetite at the bottom of the tree is symptomatic of continued unease throughout the equity market. Real recovery remains elusive.