City financial institutions are revving up their communications
activity, partly to polish up a tarnished image but also in anticipation
of changes expected with the coming election
It’s now a decade since the Financial Services Act was passed and
promptly revolutionised the workings of the City of London. But today,
in the wake of a series of financial scandals - such as the collapse of
Barings and the furore surrounding the mis-selling of pensions - many
MPs and City barons take the view that there is a pressing need to
restructure the way the Square Mile is run and regulated.
Change, in some form or other, is a virtual certainty; irrespective of
which party wins the forthcoming general election. With this in mind,
the leading City regulators and investment exchanges have been stepping
up their communications activity, anxious that their roles be understood
by politicians and those who frame policy who may be contemplating an
overhaul of the status quo.
The importance attached to communications in the current political
climate has manifested itself in a welter of recent activity. The London
International Financial Futures and Options Exchange (LIFFE), Europe’s
main derivatives trading centre, has just appointed Hill and Knowlton as
its public affairs consultants.
The Security and Futures Authority, the watchdog for brokers and futures
dealers, has just appointed Fishburn Hedges to handle a PR and public
affairs brief. And the Investment Management Regulatory Organisation
(IMRO) is reviewing its public affairs account after six years with
Market Access. In addition, the London Stock Exchange recently hired
APCO in place of its public affairs consultancy of five years standing,
Rowland Sallingbury Casey. There is more to all these changes than
‘There is a stepping up of activity not unrelated to a possible change
of government,’ says one senior figure at an investment exchange.
‘Clearly there’s a lot more happening in this period before a general
election than normal. And we take more care to explain ourselves in such
a period,’ adds a source at one of the City’s regulatory bodies.
Labour’s strong showing in the opinion polls has convinced many that it
will triumph at the next election. Moreover, the party’s City spokesman
Alistair Darling has said that the current regulatory system should be
reformed as a matter of urgency.
Should Labour get in, the likelihood is that it will bring in
legislation pertaining to the City during its first couple of years in
office. Consequently, all those bodies with some kind of regulatory
responsibility have been sharpening up their arguments in defence of
their past performance.
It is not a defence being undertaken lightly. For while Labour’s plans
remain clouded by uncertainty, Darling favours a sweeping transformation
that would include an increase in power for the City’s chief regulator,
the Securities and Investments Board.
A strengthened SIB would clear the way for the abolition of the next
tier of regulation - the self-regulating organisations such as the SFA,
IMRO and Personal Investment Authority. Indeed, many take the view that
the City’s current regulatory structure is too cumbersome.
There are, it is felt in some quarters, too many regulators applying the
regulation. And some with not enough bite to provide adequate
‘There’s pressure on all the regulators to deliver and be seen to
deliver effective regulation,’ says Fishburn Hedges chairman Dale
‘For IMRO it’s important that there isn’t change for change’s sake,’
says IMRO head of press and parliamentary function, Judy Delaforce. It
is a sentiment echoed by other regulatory body communicators who prefer
not to go on the record.
‘The political argument is going to be: how can you change the legal
framework of regulation to get the balance of power between the front-
line regulators and the supervising regulator right?’ says Kit Jebens,
head of Fishburn Hedges’ regulatory practice and former chief executive
of LAUTRO, one of the bodies superseded by PIA.
Even if Labour doesn’t win, there will be change. The Treasury Select
Committee is in the process of examining certain aspects of City
regulation and is likely to propose some sort of shake-up.
Although political uncertainty has been the main spur, other factors
have also contributed to the greater emphasis being placed on
communications in the City. The London Stock Exchange, for example, has
been striving to rebuild an image tarnished by a long run of negative
publicity. Of late this has included allegations that it is anti-
competitive and almost gleeful press coverage of the sacking in January
of its chief executive Michael Lawrence after he ‘lost the board’s
Increasing competition from overseas centres and the need for closer
international co-operation to forestall a repeat of the Barings affair,
have also coloured the approach of the City’s investment exchanges and
regulators to communications. Yet in most cases the central thrust has
been to highlight effectiveness.
‘We’ve been steadily increasing the impact of our public affairs
programme to reach opinion formers,’ says LIFFE director of external
affairs Richard Pratt. ‘Our most important message is about the extent
of the economic value we add to the UK - our contribution to the balance
of payments, the jobs we create and the way companies can hedge their
risks on our market.’
Today those risks are also being hedged through a sharper focus on