Bischoff labelled ‘odd choice' as new FRC chair

by Richard Crump

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08 May 2014

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THE APPOINTMENT of former heavyweight banker Sir Win Bischoff as the next chairman of the Financial Reporting Council was described as an "odd choice" during a Treasury Select Committee hearing yesterday, in which MPs questioned his role during the financial crisis.

Giving evidence to the committee following his appointment as chair of the reporting watchdog, Sir Win, a former chairman of UK bank Citigroup and Lloyds Banking Group, was castigated by one committee member as "one of the insiders' insiders" whose employment exemplifies the culture of "the City looking after City insiders".

Labour MP John Mann suggested Bischoff lacked credibility in assessing corporate governance in the sector given his work at Citigroup, which he described as "one of the biggest disasters in the financial crisis", and added that Lloyds had been "found guilty of various improprieties".

Bischoff denied any responsibility for actions taken prior to his appointment as Lloyds chairman in September 2009 and defended the bank's performance during his tenure. "Lloyds has been recapitalised...taxpayers are beginning to get back their money at a profit and performance at Lloyds under the management team I assembled has been good," he said.

He also pointed out that he had not been responsible for his appointment at the FRC and that he is the only banker on the regulator's board, which is made up of a "range of people".

Banking audit agreement

Addressing the panel, Bischoff told MPs that he agreed with their recommendation - published by the Parliamentary Commission on Banking Standards last summer - that banks be made to publish a separate set of accounts for regulators and that the accounts should be externally audited.

"As far as the FRC is concerned, I know it's very happy to work together with the Prudential Regulation Authority in relation to that," Bischoff said. He added that he has "a very great sympathy" with the view that such audits should be published.

Bischoff also warned that further consolidation among the Big Four audit firms - PwC, KPMG, Deloitte and EY - would be "disastrous" but dismissed suggestions the firms were too big to fail. However, he urged that care be taken to avoid a repeat of the demise of Arthur Anderson, which collapsed in the wake of the Enron scandal.

"If there was a major problem one would need to be more thoughtful than perhaps we were with Andersen," he said. "Not the whole firm, but a part of the firm could fail."

Bischoff also said the FRC was "giving consideration" to publishing auditors' scores from its regular audit quality inspections in a league table to encourage higher standards.

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