The Observer - 25.08.2019

• The Observer
  56 25.08.19 Analysis

B

ritain’s abject weak-
ness as a trading
nation is on full dis-
play in Biarritz at this
weekend’s G7 summit.
The warm embrace
from Donald Trump for his old
friend Boris Johnson and the talk of
favourable access to American mar-
kets cannot disguise how ill-pre-
pared the UK is for life outside the
European Union’s protective wall.
Like a medieval tribe piously
leaving the citadel even as its
enemies are massing on the
horizon, Britons are discover-
ing that Brexit is going to demand
many more compromises than were
ever forced on it by majority voting
inside the EU.
US demands that Britain accept
its beef with added growth hormone
and its chlorine-washed chicken
are well-known and unwelcome,
but it is what these products rep-
resent that is so crucial to the UK’s
future. Once the prime minister con-
siders lowering more broadly the
standards of UK agriculture to the
base level accepted by US consum-
ers, all alignment with EU standards
will be broken.
Johnson’s chief adviser, Dominic
Cummings, knows that his efforts to
eliminate the Northern Irish back-
stop depend on a continued align-
ment with the EU on trade to get
around the problem of goods being
checked at the border.
The Brexiter argument – one
that will supposedly satisfy Angela
Merkel and Emmanuel Macron’s
30-day deadline – is that alignment
with the EU will allow frictionless
trade until the technology needed to
overcome physical border controls is
tested and satisfi es Brussels.
Instead, Johnson is preparing
to rush into Trump’s arms with a

B

eing unskilled, late

or absent from the

offi ce and described

as a “liability” by

colleagues – all

reasons to ensure a

swift P45 for workers in fi nance.

That is, unless you have the family

lineage that gives something extra

to the bank you’re working for.

Another grim chapter in the hir-

ing practices of the major banks was

revealed when, last week, Deutsche

Bank was the latest to be fi ned

over a so-called “princelings” scan-

dal. According to allegations from

the US Securit ies and Exchange

Commission (SEC) , the unquali-

fi ed offspring of powerful Chinese

and Russian state fi gures had been

offered jobs so that the bank could

get a better foothold in future deals.

While thousands of non-connected

candidates fought through the rig-

orous hiring process , it appears that

a select few got jobs with their only

qualifi cation being the position their

fathers held in state-connected com-

panies in Asia and Russia. One egre-

gious example cited was the son of an

executive at a Russian state-owned

company who was transferred to

London but failed to turn up to work,

cheated in an exam and was “a liabil-

ity to the reputation of the program,

if not their fi rm” – a quote unlikely to

make their LinkedIn page.

It is an example of a practice that

has gone on for years – the investiga-

tion into Deutsche Bank covered the

period between 2006 and 2014. But

before the German giant’s settlement

had come bigger fi gures – in 2016,

JPMorgan was penalised $264m

and Credit Suisse last year agreed to

pay $77m. One source in HR at the

German bank said the Russian exam-

ple was a classic case of what they

had to handle every year.

Deutsche did not admit or deny

the fi ndings under the settlement,

but claims to have taken extensive

measures to improve its practices.

Whether that will be any comfort

for th ose applying for jobs in Canary

Wharf is open to question.

trade deal that will, at least as far as

the EU is concerned, usher in sub-

standard food. All UK food will then

potentially fail the EU’s tests , and

the Irish government will be told by

Brussels that it must institute bor-

der checks.

The US president also wants to

extract concessions on the imple-

mentation of privacy rules and

data fl ows. The US has a more lib-

eral approach to personal data than

Britain, which operates under the

EU’s more stringent GDPR standard.

Macron’s proposed taxes on dig-

ital companies will also become a

dividing line. Trump opposes as

“foolishness” the French president’s

3% levy on the revenue from dig-

ital services earned by fi rms with

a turnover in France of more than

€25m and €750m worldwide.

Former chancellor Philip

Hammond last year announced

a less onerous 2% tax on search

engines, social media platforms and

online marketplaces with global

turnovers in excess of £500m.

According to Washington, both

these ideas unfairly punish Google,

Facebook and Amazon, and will be

outlawed in any trade deal.

Disputes will be settled in a court

of arbitration, where major corpo-

rations maintain the right to sue

governments that make unilateral

changes to the law that affect their

profi ts. This is a mechanism tobacco

companies have used to extract

compensation for laws restricting or

banning smoking.

Such a tactic is unlikely to be

used against consumer legisla-

tion in the UK (though an exten-

sion of the sugar tax could lead to a

claim by Coca-Cola and Pepsi), but

Washington has long objected to the

way the NHS negotiates the price of

medicines, and this system, which

keeps down the cost of drugs in the

UK, could be the subject of a dis-

putes claim.

Then there are the little clauses

that can seem innocuous and yet

reveal just how low a country can be

forced to stoop to secure a trade deal

with a more powerful partner.

Trump has insisted that all coun-

tries seeking a trade deal agree to

outlaw boycotts of Isr aeli goods.

David Cameron’s administration

blocked public bodies from sup-

porting boycotts of Isr ael, but it is a

stretch for the UK government to act

against all boycotts.

Johnson may say he is concerned

about animal welfare and environ-

mental standards, but so far th is is

just words. He needs to make clear

that EU standards are the base-

line. They are not a preference to be

cheaply bargained away.

B

ritain’s lenders are
eagerly awaiting
the end of summer.
As they return from
their far-fl ung hol-
idays, bankers will
start processing the fi nal batch of
payment protection insurance (PPI)
claims and start drawing a line
under one of the largest mis-selling
cases in UK banking history.
It has already cost the largest high

New rule breaches in the PPI affair show how vigilant regulators must be

Want a career

on Wall St? Best

to have a father

the bank needs

to impress

street lenders more than £41 bn

to process claims and compen-

sate customers. But some lenders

have apparently been slow to learn

their lesson. On Friday, it emerged

that Royal Bank of Scotland and

Santander had been fl outing PPI

rules set by the Competition and

Markets Authority for nearly half

a decade.

It seemed simple enough: the

regulator ordered banks to send

customers an annual reminder,

detailing three pieces of informa-

tion: how much customers had

paid for their PPI policies to date,

what type of cover they had, and a

reminder that they had a right to

cancel the cover.

But RBS failed to send remind-

ers to nearly 11,000 customers over

six years, meaning some consum-

ers were paying for the insurance

without being aware they still held

policies. Santander, meanwhile, sent

incorrect information to more than

3,400 of its mortgage PPI customers

between 2012 and 2017.

For anyone inclined to give the

banks the benefi t of the doubt,

it’s worth noting that RBS and

Santander were both reminded to

follow the CMA’s orders as far back

as 2016.

Proving they cannot be trusted on

PPI policies, both banks have since

been forced to appoint independent

reviewers to monitor their progress

and make sure they don’t break the

rules for a third time.

This doesn’t look good when

banks are trying to wipe their hands

clean and claim a fresh innocence

a decade on from the fi nancial cri-

sis. And it only proves that City reg-

ulators will have to stay sharp if they

hope to protect consumers from the

next major scandal.

A US trade deal will mean compromises

for Britain: Trump will make sure of it

Business leader

Extension of the sugar tax could see Coca-Cola sue the UK government for damage to its profi ts. Reuters