The Times, Saturday 8th November 2014
Manifesto: troubled City turns to voice of
experience
As the lord mayor, Alan Yarrow is ready to defend and promote the
financial centre.
Alan Yarrow is the first lord mayor of London to emerge from the
banking and capital markets since the financial crisis hit. Perhaps
more than any other mayor, therefore, he can expect to face
difficult questions about the culpability of senior bankers — such
as he — for the crash and its aftermath.
Those questions shouldn’t be as difficult as those faced by his
predecessor, Fiona Woolf — who resigned last week from the
government inquiry into historical sex abuse over her links with
Lord Brittan of Spennithorne, the former Tory home secretary —
but they are important for a financial sector selling itself to the
world.
And to answer them the City has turned to the voice of experience.
Mr Yarrow has been through it all, from stockbroking through Big
Bang, when the stock market marched into the 21st century and
the global industry arrived on its doorstep, then into investment
banking and then to the chairmanship of key City bodies such as
the London Investment Banking Association and the Chartered
Institute for Securities & Investment.
Yesterday represented a pinnacle. He took office as the 687th lord
mayor at a ceremony at Guildhall and today will lead the Lord
Mayor’s Show, a procession featuring more than 7,000 people and
150 horses on a 1.7-mile route around the City. It presages a
gruelling year of global travel as the Square Mile’s foremost
ambassador, 12 months of racking up the air miles for a
descendant of a family of shipbuilders.
Mr Yarrow’s great-grandfather Alfred was a polymath Victorian
entrepreneur, who went from building the fastest launches on the
Thames to running a Glaswegian shipbuilder. Yarrow Yard still
survives there as part of BAE Systems. The new lord mayor’s career
path began at Lancaster University, however, where he set out to
study economics and French and where academic life soon palled.
“We were on strike a lot. I found a number of my friends were
down in the City earning their keep.” He quit, went to London and
tried his hand at selling newspapers in Victoria station or fancy
goods at Harrods. “I was either underqualified or overqualified.”
That brief start in economics helped him to get into Grieveson
Grant, the stockbroker, and an education across a range of
markets. A former colleague who was working on the private client
side when Mr Yarrow was working in gilts recalls having to go over
to that desk for advice:
“He would stop and help out. He would give a bit of advice. He was
an absolutely classic old-fashioned banker.”
Mr Yarrow’s career at what was by then Dresdner Kleinwort came
to a halt in 2008, when its parent, Dresdner Bank, was bought by
Commerzbank. “I decided they would do better without me and I
would do better without them,” he says diplomatically. After a
nine-month hiatus, Commerzbank was required to sell the
Kleinwort Benson name and this meant the creation of a new
private bank. He was asked to be its chairman.
By the mid-Noughties, he was considering the lord mayorship. He
stepped up to become a non-executive at Kleinworts and was
approached to replace the local alderman, who was retiring. “Being
an old-fashioned person, I believe this country is built on a
foundation of heritage and tradition.” He decided to stand for an
office that has often been the start of the process towards the
highest office in the City of London Corporation.
He was appointed a magistrate and was invited to join the
Fishmongers’ Company. He was made chairman of the London
Investment Banking Association in 2004, one of several
appointments to the various bodies that oversee the City. He
became a member of the Takeover Panel, vice-chairman of the FSA
Practitioner Panel and vice-president of the British Bankers’
Association.
Regarding those difficult questions that are set to crop up in his
year in office, he points out that the problems arose in markets that
were little regulated, such as over-the-counter derivatives — unlike
equities, where he worked. “The opaqueness was the problem. I
would argue that equities were pretty innocent. I’m not saying I’m
not taking responsibility. I think everybody has skin in the game,
and so they should do, and they have got to take responsibility for
it.
“I do believe that people should suffer as well as benefit if they
make the wrong judgment. In the banking world in the early
millennium, it was a one-way option.” This goes back to his days at
Grieveson Grant, a limited liability partnership, where risk was
shared. “People lost their bonuses. That’s a discipline which has
been lost.”
Mr Yarrow believes that progress has been made, for example, in
the attempts to lengthen the period of time before bonuses are
paid. “There’s a completely different attitude from senior
management.” He says that although such attitudes have changed,
there will always be those who misbehave: “It’s a marketplace.
Nobody’s perfect.”
This is an area where the Chartered Institute for Securities &
Investment, of which he became chairman in 2009, has a role. Of
the institute’s 44,000 alumni around the world, more than 900 act
as volunteer advisers, helping to write exams. They have collated
78 dilemmas, or ethical problems, where students have to reach
the right conclusion. “You don’t spend your time ticking boxes and
filling in forms. You look at the behaviour of people.”
It is traditional for the lord mayor to nominate charities that will
benefit from funds raised during his tenure. In this, he has a
personal interest. His son, aged 32, has learning difficulties and
lives in sheltered housing in Dorset managed by Scope, one of the
two charities he is supporting. The other is Mencap. “People with
disabilities are on the fringes of society,” Mr Yarrow says. “We’ve
got to get a lot better at including them in the mainstream of what
we do.”
Much of his year will be spent travelling the world. He believes that
a natural diffidence among the British sometimes can be taken for
arrogance.
“Our problem is as a country we don’t know the difference between
marketing and bragging. If we are going to go forward, we need to
know that difference.”