Standard Chartered: shock departure of finance director Richard Meddings

Standard Chartered stunned the City when it announced the departure of its longstanding finance director Richard Meddings – previously considered a candidate for chief executive – and embarked on sweeping changes to its operations around the world.

Chief executive Peter Sands announced plans to merge the wholesale and consumer divisions in an attempt to energise the emerging markets bank, which is suffering its first profits slump in a decade. The move is likely to lead to job cuts.

He was forced to insist "I'm not going anywhere" after the departures and promoted the current boss of the wholesale division – Mike Rees – to become his deputy. Chairman Sir John Peace also had no plans to leave, said Sands.

One of the highest paid bankers in the industry after receiving nearly £35m in the past four years, Rees was immediately seen as the heir apparent to Sands, appearing to have usurped Meddings, previously regarded as the natural successor.

Amid concerns about the bank's financial strength the shares fell to their lowest level since it paid £415m to settle money laundering allegations in the US just over a year ago, though they recovered some of their losses to end the day down 2% at £12.83 after Sands insisted the bank was comfortable with its capital position.

Sands and Meddings, who insisted the decision to go was his own and taken in the Christmas holidays, had been credited with steering the bank through the financial crisis relatively unscathed until 2012's money laundering scandal in the US.

"It was totally my decision to leave," said Meddings, often a candidate on lists drawn up for top jobs at rivals. "After 11 years on the board of this bank and seven years as finance director it seems a natural time to step away," he added.

The bank was facing questions about the decision to keep paying Meddings his £800,000 salary until next year, as well as a potential bonus, even though he will leave in June. The 55-year-old is also walking away with unvested shares currently worth about £8m but whose actual value will only be known when they pay out over the next three years. Meddings' pension pot is likely to reach £7m by the time his 12-month contract expires next year.

Meddings had been caught up in the money laundering scandal when remarks by an unnamed bank official to a US colleague – "You fucking Americans" – were said have come from him.

Also leaving is Singapore-based Steve Bertamini, head of the consumer division, whose role is "falling away" according to Sands. Bertamini was hired in 2008 and the last £900,000 instalment of his signing-on fee will be paid in May – two months after he leaves the board. He will have his relocation to the US paid for by the bank, receive his £600,000 salary until this time next year and take away with him unvested shares worth £6m at current market values, although that value is subject to change .

Sands described both departing executives as "outstanding leaders" and "good friends" who would be missed. He said neither was receiving any form of payoff.

Last year it emerged regulators had required Meddings to be stripped of responsibility for the risk functions at the bank and Sandy Chen, analyst at Cenkos, said: "FD Meddings' departure is key – his position had already begun to erode at the end of last year, with risk oversight transferred from him to Peter Sands." Chen said later his concerns had been allayed and he had been reassured that further management changes were not on the way and that the bank could generate enough capital. Sands – chief executive since November 2006 – sought to quash speculation about a boardroom rift. "We remain very comfortable with our capital position and have no plans [for a rights issue of new stock]. We have a unified board which is fully behind the strategy".

Meddings said he had not decided what to do next and quipped he might consider financial journalism.

One investor said: "It's not an ideal world having a finance director leaving without a replacement".

There was speculation that Naguib Kheraj, one-time Barclays finance director and a non-executive at Standard Chartered, might be a candidate while head of strategy Anna Marrs was also cited by some.

Rees' salary will rise to £975,000 pounds from £735,000 in April although his earnings potential fall by 40%.

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Loans to business getting cheaper and more readily available, Bank says

Availability of credit to corporate sector increased significantly in fourth quarter of 2013, according to Bank of England

Hopes of an end to the prolonged fall in business lending were boosted on Wednesday when the Bank of England announced that loans were becoming cheaper and more readily available to the UK corporate sector.

In a regular update, Threadneedle Street said there were signs that credit conditions had eased for companies towards the end of last year.

"The overall availability of credit to the corporate sector increased significantly in the fourth quarter of 2013, according to lenders, and a further increase was expected in the first quarter of 2014," the Bank said. "Lenders reported that the availability of credit had increased for small businesses and large private non-financial corporations."

It added that the final three months of last year had also seen more credit become available for mortgages, particularly on homes with high loan-to-value ratios. A "significant" further increase in availability is expected in the first quarter of 2014.

The Bank said demand for credit remained patchy. Households and medium-sized businesses were taking advantage of the easier conditions, but demand from small businesses was flat and there was a slight increase in demand from big companies.

Threadneedle Street also reported lower interest rates for borrowers as measured by the spread between the official bank rate of 0.5% and the loan rates charged to individuals and businesses.

"Spreads on corporate lending fell in the fourth quarter, with significant reductions reported for medium-sized companies and large private non-financial corporations (PNFCs), and a slight reduction reported for small businesses. Over the next three months, lenders expected spreads to tighten further for medium-sized companies and large PNFCs, and to be little changed for small businesses."

Lee Hopley, chief economist at EEF, the manufacturers' organisation, said: "Steady improvements in credit conditions are continuing and the Bank's survey brings further signs that finance providers are making more credit available and risk appetite is increasing. However, the issue of cost is still lingering for smaller businesses. With a turnaround in investment on the cards for this year we will also need to see a real pick-up in net lending to businesses and fewer companies saying they have been discouraged from accessing external finance."

Howard Archer, economist at IHS Global Insight, said the pick-up in credit availability to companies was encouraging but had yet to translate into increased corporate lending.

"Indeed, latest data from the Bank of England shows that net lending to non-financial companies fell by £4.7bn in November. This was the sharpest drop since the series started in April 2011. Net lending had previously fallen by £1.1bn on October following a rare rise of £714m in September."

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UK economy: Unemployment figures explained by ONS

The answers lie with the Labour Force Survey, the huge continuous survey that ONS uses to measure unemployment (along with employment and economic inactivity).

The unemployment figures use an internationally-agreed definition.

To count as unemployed, people have to say they are not working, are available for work and have either looked for work in the past four weeks or are waiting to start a new job they have already obtained. Someone who is out of work but doesn't meet these criteria counts as "economically inactive".

Each quarter the LFS covers 100,000 people in 40,000 households chosen randomly by postcode. That's about one in 600 of the total population.

The results are then weighted to give an estimate that reflects the entire population. Our survey has a very large sample size compared, for example, with opinion polls, which often sample around 1,000 people

Even so, in any survey there is always a margin of uncertainty, in this case around plus or minus 3% for the unemployment level.People sometimes ask why ONS doesn't increase the sample size to give monthly figures.Put simply, it's a matter of resources. Surveys on this scale take a great deal of work. The cost of doing it on a monthly basis was estimated as at least £7 million a year back in the mid-1990s. So a rolling three-monthly survey remains the best solution for efficiently producing accurate yet manageable data.Obviously it's possible to look at the number of people unemployed, for example, in January-March and compare that with the February-April figure to see what the change is. But it wouldn't be a good idea: the February and March data are in both sides of the comparison, so effectively you're looking at January compared with April.Quite apart from the smaller sample involved, the sample frame wasn't really designed for a monthly survey.Prior to 1998, the LFS results were only published once a quarter, and the sample frame was designed around this. The country was divided into 212 interviewer areas, each of which is subdivided into 13 weekly 'stints', each randomly allocated across one of the 13 weeks of the quarter.So while this means that across the entire three months we can be sure that the sample in each interviewer area is representative of the area as a whole, we would not necessarily expect it to be so with just one month's worth of interviews.ONS has in fact been publishing some single-month LFS employment, unemployment and inactivity estimates on our website since 2004.We did this in response to user requests for more information about the reasons behind movements in the three-month rolling figures. However, the monthly series are more volatile than the three-month ones - for the reasons noted - and so these are not of the quality to be designated National Statistics.The other measure of joblessness - the claimant count - is published for each single month. It doesn't suffer from the limitations of sample size and sampling frame, because it derives from the numbers of Jobseeker's Allowance (JSA) claimants recorded by Jobcentre Plus, so a monthly figure is possible right down to local level.But because many people who are out of work won't be eligible for JSA, it's a narrower measure than unemployment, typically about 1.5 million people recently, compared with about 2.5 million for unemployment.Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us also On Facebook

UK construction sector growth remains strong, survey says

Growth in the UK's construction sector remained strong in December, a survey suggests, with work on commercial projects seeing a sharp rise.

The latest Markit/CIPS purchasing managers' index (PMI) for the sector recorded a level of 62.1 last month.

While this was below November's six-year high of 62.6, it was still well above the 50 level that marks the divide between growth and contraction.

On Thursday, the PMI manufacturing survey also showed strong growth.

Wider recovery

Markit said the latest survey indicated that the construction industry had now seen output grow for eight months in row.

House building remains the fastest growing area of construction last month, although the pace of growth has slowed slightly from November.

However, Markit said that the construction sector was now seeing a broader recovery, with commercial building work rising at the fastest pace since August 2007.

The industry has also seen jobs increase for seven months in a row.

"The improving UK economic outlook is helping boost private sector spending patterns, meaning that the construction recovery has started to broaden out from housing demand and infrastructure projects to include strong growth in commercial building work," said Tim Moore, senior economist at Markit.

The survey is further evidence that the UK's economic recovery is continuing.

On Thursday, Markit said that its PMI survey for manufacturing in December showed the sector's recovery remained "on track". The PMI survey for the services sector is due to be released on Monday.

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FCA stands by decision to sanction Paul Flowers as Co-op Bank chairman

Regulator's Clive Adamson refuses to concede to MPs that appointment of now-disgraced Methodist minister was mistake

The regulator who authorised Paul Flowers's appointment as chairman of the Co-operative Bank faced intense criticism from MPs on Tuesday after he insisted he stood by the decision to allow the now disgraced Methodist minister to take on the role after a 90-minute interview in 2010.

Clive Adamson, head of supervision at the Financial Conduct Authority (FCA), met with incredulity among MPs on the Treasury select committee when he initially refused to concede that the appointment of Flowers – branded a "financial illiterate" by the committee's chairman, Andrew Tyrie – had been a mistake.

Under often hostile questioning, Adamson was asked if he and others were right to stay at the regulator, which has taken over from the Financial Services Authority. "You clearly did get it terribly wrong," he was told by Andrea Leadsom.

The Co-op Bank is now 70% owned by its bondholders, led by US hedge funds, and only 30% by the mutually owned Co-op Group of supermarkets, pharmacies and funeral homes, after a rescue operation to inject £1.5bn into the bank. The committee is examining the aborted attempt by the Co-op to take over 631 Lloyds Banking Group branches and questioning the merger of the bank with Britannia Building Society in 2009.

Tyrie said the regulator's decision to approve Flowers – who was exposed buying illegal drugs last year – was "a negligent decision, a very poor decision". He said Adamson's evidence exposed flaws in the so-called approved persons regime, under which officials are authorised to work in the City. "These flaws contributed to the appointment of a man with no knowledge of finance and no experience of running the board of a major corporation as the chairman of Co-op Bank in the immediate aftermath of the financial crisis," Tyrie said after the hearing.

Tyrie called for the entire approved persons regime to be torn up. "[Adamson] told us that, in the FCA's view, the reforms being applied to banks should also apply across the rest of the financial services industry," he said.

Towards the end of the two-hour hearing, Adamson eventually conceded that the appointment of Flowers – who chaired the bank from mid-2010 and left in June 2013, just as the £1.5bn capital shortfall was identified – was wrong, but said it had been the right decision at the time.

He insisted that the Flowers he authorised was a "more cogent individual" than the one who appeared before the committee last year, when the chairman was unable to give the size of the bank's balance sheet.

Adamson stressed that nothing in the rules at the time required him to interview Flowers. "I didn't think it was a mistake given the information I had at the time," Adamson said. Flowers, he said, was appointed to chair an "unruly" board of 22 individuals, and two deputies were appointed – Rodney Baker-Bates and David Davies – to counter his lack of banking knowledge.

"Do I regret what subsequently happened? Yes I do," Adamson said, conceding that Flowers would not be authorised now. Mark Garnier MP declared himself "almost speechless" after Adamson admitted Flowers had been approved after an hour-and-a-half interview and without his references being taken up. Flowers had disclosed a spent conviction for gross indecency from 1981, but it was not deemed relevant.

Sitting in the public area of the committee room was Lord Myners, who was last month appointed as a non-executive of the Co-op Group and will head the review of its governance. As Myners looked on, Adamson said: "I stand by the decision" to appoint Flowers.

Baker-Bates visited Adamson in 2012 to warn that the takeover of the Lloyds branches was a "step too far", but the negotiations were allowed to carry on for another nine months before they collapsed in April 2013.

Baker-Bates "had blown the whistle", said Labour MP Pat McFadden and, along with the other vice-chairman, Davies, had voted against this so-called Verde transaction. Both have now left the board.

Adamson was also facing questions about the Co-op's merger with Britannia Building Society in 2009, which is now blamed for many of the problems at the bank but for which the FSA's authorisation was not officially required. Adamson said there was no political interference, but there had been support for the co-operative movement.

The tenure of Graeme Hardie as a non-executive director on the Co-op board was also questioned after he took the role despite having been involved in approving Flowers' position as chairman when he was an adviser to the regulator. Richard Pym, chairman of Co-op Bank, said Hardie was doing a first-rate job and should not resign.

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Co-op Bank execs face BoE investigation

The Bank of England and the Financial Conduct Authority have confirmed they will launch investigations into the near collapse of the Co-op Bank

Former senior managers of the Co-op Bank are to be investigated by Britain’s two financial regulators over their role in the near failure of the troubled lender that last year discovered a £1.5bn capital shortfall.

The Prudential Regulation Authority (PRA), the Bank of England-run bank supervisor, and the Financial Conduct Authority (FCA) have confirmed they have begun an “enforcement investigation” into the Co-op Bank that will look at the actions of the lender’s “former senior managers”.

The launch of the investigation follows a two-month-long joint inquiry by the PRA and the FCA into the circumstances that led to the Co-op Bank’s troubles that will see the lender’s parent, the Co-op Group, give up control of the business to its bondholders.

The investigation could lead to former manager being fined, suspended and possibly banned from working in the financial services industry. The investigation could also lead to criminal action should the officials find any evidence of wrongdoing by individuals, though this would require a separate police investigation.

The Reverend Paul Flowers, the former chairman of the Co-op Bank, is already the subject of a police investigation into his alleged drug-taking, but will now face a probe into his professional conduct while at the bank, along with other former directors and executives.

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UK interest rates to stay at 0.5% in 2014 - economists

Interest rates in the UK are unlikely to rise this year, according to a snapshot of views of the UK's top economists from the BBC.

An overwhelming majority, 93% of the 28 economists polled, think rates will still be 0.5% at the end of 2014, with more than half predicting the first rise in the second half of 2015.

More than 40% believe unemployment will fall to 7% in 2014, from 7.4% now.

Two-thirds also think wage increases will overtake inflation this year.

Some observers have suggested recent rises in house prices could force the Bank of England to raise rates sometime in 2014, but the majority of economists used by the Treasury and polled by the BBC rejected this view.

Almost 80% think rates will begin to rise in 2015, with 15% saying they will not increase until 2016. Only 7% of those polled think rates will rise in 2014.

The unemployment rate of 7% is significant because this is the level the Bank has said needs to be breached before it considers raising interest rates.

The snapshot suggests there is less certainty in the City about unemployment levels than there is about interest rates.

Although more than 40% think the jobless rate will hit 7% this year, exactly half think that will not be until 2015. Just 8% think it will not be until 2016.

Three respondents actually believe rates will rise before unemployment falls to 7%, which would mean the Bank abandoning its forward guidance on interest rates.

But some economists warn about getting too fixated on the 7% unemployment rate. Kate Barker, a former member of the Monetary Policy Committee, says unemployment could fall and wages could rise, without raising concern over inflation.

"The real question for the economy this year is not just about interest rates. It's actually about what is going to happen to productivity, if we see productivity start to recover we could see wages pick up quite a bit without any damage to inflation - so there are more things to look at other than employment," she said.

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