The head of private bank Coutts has been ousted over the closure of Nigel Farage’s bank accounts in a desperate attempt by NatWest to contain a crisis that has wiped £1bn off its share price.
Peter Flavel’s resignation from Coutts was pushed through by the NatWest interim chief executive, Paul Thwaite, but despite the move, the future of its chairman, Sir Howard Davies, appeared far from secure.
The prime minister pointedly failed to back Davies, despite concern over the government’s role in the shock departure of the chief executive, Alison Rose, which was announced in the middle of the night earlier this week. While the City minister, Andrew Griffith, said in an interview with Sky News on Wednesday that it was not necessary for Davies to quit earlier than planned, Rishi Sunak refused on Thursday to give the chairman his backing.
Davies was due to retire next summer and the hunt had already begun for a new chair before NatWest was engulfed in a political storm. Asked whether he ought to remain in place, as planned, Sunak said: “This isn’t about any one individual, it’s about values – do you believe in free speech and not to be discriminated against because of your legally held views?”
The comments will cast a shadow as NatWest bosses attempt to restore a sense of order when they update investors on the group’s half-year financial results on Friday morning. Davies is expected to lead the call, alongside Thwaite and the chief financial officer, Katie Murray, though NatWest would give no formal confirmation of who was expected to attend.
The losses will be shared by the taxpayer, as the government holds 39% of the bank’s shares, having bailed out the group during the 2008 financial crisis. The intention is to continue reducing the government’s stake, which was originally just over 50%. Concerns about the banking sector after the collapse of Credit Suisse, and the current disruption, will have left investors shaken.
The row escalated last week when Farage obtained documents detailing why his accounts at Coutts had been shut. A report produced for the bank’s internal wealth and reputational risk committee showed that while the former Ukip leader had for some time been below its commercial criteria – requiring customers to have £3m in savings or £1m in loans or investments – it was ultimately concerned that his alleged “xenophobic, chauvinistic and racist views” posed a risk to the bank’s reputation.
Despite personal apologies over the wording of the document, and promises to launch an independent investigation into the circumstances that led to his accounts being closed, Rose failed to keep her job. Her resignation, which was confirmed in a 1:30am announcement on Wednesday, followed anger in Downing Street about her admission that she had discussed Farage’s banking relationship with a BBC journalist, in an apparent breach of client confidentiality.
Sunak’s failure to back Davies, who originally gave full support to Rose, has left a political vacuum. Officials at the Treasury and the Bank of England held talks on Thursday as concerns mounted over the risk that the banking group could be left rudderless, should Davies quit. Officials relayed these concerns to ministers and Downing Street, sources said.
The decision about whether to back Davies “seems to be on hold”, one Treasury source said. “So they risk a back him or sack him situation while the taxpayer’s stake loses value.” A source close to the chancellor rejected that claim, saying the situation regarding Rose’s departure was different and based on a breach of banking confidentiality.
A Treasury spokesperson said it was incorrect that there was concern among officials that the prime minister’s refusal to offer support for Davies risked further instability. “As the economic secretary to the Treasury [Griffith] has said, NatWest already has an orderly transition process in place to replace its chairman,” the spokesperson said.
Flavel’s immediate resignation on Thursday was “the right decision for Coutts and the wider group”, according to a statement by Thwaite, who has been tasked with getting a grip on the growing storm that risks leaving the bank’s boardroom and executive team without permanent leadership.
“In the handling of Mr Farage’s case we have fallen below the bank’s high standards of personal service,” Flavel said. “As CEO of Coutts, it is right that I bear ultimate responsibility for this, which is why I am stepping down.”
Farage, who has continued to call for more heads to roll over the scandal, welcomed Flavel’s departure. “It was only a matter of time before Peter Flavel, Coutts CEO, stood down,” he tweeted on Thursday. “The ultimate responsibility for the dossier de-banking me for my political views lies with him. I even wrote to Mr Flavel twice before going public and didn’t receive an acknowledgment.”
Neville Hall, a risk and compliance expert and partner at the law firm Punter Southall, said Flavel’s position had become untenable. “Peter Flavel’s departure was inevitable for three reasons: failure to put a customer’s interests first; poor oversight within Coutts; and inaccurate communications with its parent.
“It shouldn’t have been down to the government to initiate Alison Rose’s departure, not least because they are conflicted as the largest shareholder. I’d expect the Financial Conduct Authority to be actively engaged with the boards of Coutts and NatWest to discuss how they can demonstrate adequate oversight, judgment and above all customer protection.”
