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.”