A Serious Error of Judgment
July 25 2023
Scarcely a day went by in the Investigations Team I ran when we did not receive a request for information about a client’s affairs, trading or other matters from regulators, in the UK and overseas, occasionally the police and sometimes other authorities. And just as regularly we found ourselves informing those authorities that we could only provide this information if they made a request under some legislative requirement or court order, if they had forgotten to do this, because the bank owed a duty of confidentiality to its clients which could only be overridden in certain very clear specified circumstances. And, no, this is urgent / we’re the SEC / do we really have to? / the client won’t know or complain etc., were not those circumstances. Amazingly enough.
Sod’s Law being what it is, if you did forget to insist on this requirement, it would almost certainly happen in the case of a client who would find out and complain. Loudly.
Sod’s Law also having a sense of humour, we come to the story of NatWest, its CEO, Dame Alison Rose, Simon Jack, the BBC’s Business Editor and the case of Mr Farage’s closed account.
There really are only two important things to know about banks. The first is that their job consists of managing risk. The second is that banking confidentiality is at the heart of their obligations to their clients. NatWest, especially in its previous Royal Bank of Scotland incarnation, gave us quite the masterclass for many years in how not to manage risk. Just as that has almost faded from memory (or seems only to afflict Swiss banks – for this was the week Credit Suisse was fined £87 million for “extremely serious” faults “symptomatic of an unsound risk culture”) up pops NatWest to show us how to make a hash of client confidentiality obligations.
Dame Alison Rose has admitted she spoke to Simon Jack at a dinner and was the source of the information he gave the next day about the reasons why the bank had decided to close Mr Farage’s account. She admits this was “a serious error of judgment.”
There are some curious aspects to her explanation.
- The story was already in the public domain but she seems to have had no prepared answer in the event she was asked anything. Presumably her office knew journalists would (or might) be there and maybe also the seating plan. Was there no briefing?
- She thought the information she was giving was already public knowledge. Famously journalists are always asking questions about stuff they already know.
- She says that she was not fully aware of the reasons for the decision as this was taken by others. This may well be true. But then, if you don’t know the full story, why say anything? How hard would it have been, really, to say to Mr Jack, when he asked: “You will understand that I cannot say anything. Mmm, this soufflé is delicious.“
It is all too true that, as I recently pointed out here – “If you employ humans, someone somewhere will be doing something stupid. And some of them will be quite senior.” But they are not usually that senior. Well, not always.
It is now for the Board to decide what to do. And the regulators. They might care to remind themselves how the Board of Barclays dealt with its (now ex) CEO, Jes Staley when he got into trouble over a whistleblower. I wrote about it here. The FCA might also remind themselves. It was not – for the reasons set out here – either of their finest hours. They might remind themselves that it will now be their judgment which will be scrutinised.
Meanwhile any CEOs meeting with journalists should remember the words of this song ….. “You say it best when you say nothing at all“.