FCA admits to private talks with Aramco ahead of listings reform

The head of the UK financial watchdog has admitted to meeting with Saudi Aramco some months before amending listings rules that many have criticised as intended to relax governance requirements purely in order to win the world’s largest initial public offering to to the London Stock Exchange.

In a written response to Nicky Morgan, chair of the Treasury Committee, and Rachel Reeves, chair of the Business, Energy and Industrial Strategy Committee, pictured left, Financial Conduct Authority (FCA) head Andrew Bailey disclosed the meeting with the oil giant “in early 2017”.

Some months later, the FCA announced a new category in its listings requirements, that of a “premium” listing that would exempt state-owned enterprises from certain rules that apply to private equity.

The disclosure is politically sensitive as some will see this as a sign of political influence creating different rules and a special case being made for the huge Aramco IPO as London competes with New York to win the business.

“We can confirm that we held conversations with Saudi Aramco and their advisers in light of their interest in a possible UK listing in the early part of this year. We emphasised during those conversations that we were reviewing the listing regime,” Andrew Bailey, the head of the FCA, wrote in a letter published on Friday by the Treasury select committee.

Political sensitivity over massive fees payday

The political sensitivity revolves not simply around the perception of a massive fees bonus for London-based advisers on the deal but also the fact that in April of this year the prime minister Theresa May herself travelled to Riyadh with the head of the London Stock Exchange, Xavier Rolet, to lobby for the business.

There is the additional belief that London is seeking at the highest level to establish itself as the continuing premium financial centre in Europe, if not globally, in which to do business as it nervously eyes its post-Brexit future.

Just last week, as reported, it emerged that Goldman Sachs has taken out a lease on office space in a new tower block under construction in Frankfurt for as many as 1,000 employees, ahead of the UK’s departure from the European Union.

Government and regulator with ‘egg on their faces’

In response, Morgan today said: “Questions remain about the level of political involvement in the consultation. The UK’s world-class reputation for upholding strong corporate governance mustn’t be watered down.

“The Committee will examine this further when it takes evidence from Mr Bailey later this month,” she warned.

In his letter, Bailey appeared to pre-empt the accusation of political influence being exerted upon the FCA, saying: “Our proposals are consistent with the Treasury’s recommendations to the FCA, published at the time of the Spring Budget in early March.

“The recommendations include the point that London retaining its position as the leading international financial centre supports the aim of sustainable economic growth.”

Saudi Aramco could be valued at as much as US$1trn, according to a Financial Times assessment.

It has been suggested that Saudi Arabia’s crown prince, Mohammed bin Salman, favours New York, which if turns out to be reality, could leave the FCA and the Government with “egg on their faces for their supine attitude to winning the business”, one adviser, speaking on condition of anonymity, told International Investment today.

 

 

ABOUT THE AUTHOR
Eugene Costello
Eugene Costello has been a journalist for some 20 years, and has written for a wide variety of UK and international newspapers and magazines.

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