Tesco Bank’s chief executive Benny Higgins isn’t paid £2.2m a year (plus fabulous taxi expenses) on a whim. He commands a banker’s princely pay packet because the supermarket chain intends to be big in banking.
Expanding in financial services is a sensible strategy if, like Tesco, you think you have three factors in your favour. First, your brand enjoys greater “trust” than those of the old institutions that disgraced themselves in the crash, like Higgins’ former employers HBOS and Royal Bank of Scotland. Second, the regulatory winds are favourable because politicians are desperate to see a few so-called “challenger” banks provide some stiffer competition. Third, Tesco Bank doesn’t have any costly branches.
That backdrop is important as Tesco Bank suffers an online bank robbery that, on the sketchy details to date, looks bigger and more alarming than any recent cyber-attack in the sector. Tesco Bank customers hold 135,000 current accounts. Of those, “suspicious” transactions were seen in 40,000 accounts, with around half seeing cash removed. That’s a lot, which is why Tesco investors’ apparently sanguine view of the affair – the share price fell only 1% – is odd.
The direct cost of reimbursing customers may be merely a rounding error for a company of Tesco’s size but the knock-on effects, in the form of regulatory intervention and criticism, could be severe. Among the bodies who want to know what went wrong are: the Financial Conduct Authority, the Bank of England, the National Crime Agency and the Information Commissioner’s Office.
It’s odds-on that somebody on that list will insist on root-and-branch reform of the systems to detect and prevent fraud. Tesco, remember, has offered current accounts for less than three years and its IT systems ought to be state-of-the-art because they are relatively new. It is early in the adventure to suffer an attack of this magnitude. A repetition might oblige the bank to retreat to the safer worlds of car insurance and credit cards.
Judgment must be reserved until full details are clear. But it seems quite likely the fine for the security breach could easily be bigger than the accumulated profits Tesco Bank has made from current accounts to date. In the shoes of Tesco shareholders, you’d surely want to know more about this failure before assuming it’s a hiccup that could happen to anyone.
Sports Direct: MPs’ visit kicks off further scrutiny
“I have nothing to hide,” Sports Direct founder Mike Ashley declared to the MPs on the business select committee during his appearance in June. Apart, that is, from the camera that was allegedly hidden in the corner of the room where the parliamentarians took sandwiches on Monday.
Yes, it’s the latest chapter in the Sports Direct saga, each plotline more absurd than the last. As it happens, Ashley was abroad on Monday so, unless he was relaying orders to his staff, he’s innocent of the charge of attempting to bug the MPs at the end of their unannounced visit to the company’s Shirebrook warehouse. But, if the MPs’ account of events is accurate, somebody authorised the camera wheeze. Wright would be entitled to insist on knowing who. Such matters, however amateurish in execution, are meant to be serious.
Either way, the corporate paranoia has probably ensured MPs will refuse to close the book on Sports Direct just yet. It could have been different. A brisk trot around the aisles might have revealed little, allowing the MPs to declare their work to be done and to take their sandwiches back in London. Instead, says Wright, they were received with delays, hostility and “diversionary tactics.” They’ll be back. Sports Direct, it seems, doesn’t know when to stop shooting itself in the foot.
Volkswagen’s Pötsch likely to motor on
How is the reinvention of Volkswagen after the diesel emissions scandal going? Not well. German criminal prosecutors have widened their investigation into potential manipulation of the market to include Hans Dieter Pötsch, the former finance director who was inexplicably promoted to be chairman of the supervisory board.
The investigation may come to nothing, of course, but the probe underlines why the appointment of Pötsch provoked fury among those VW investors who think German carmaker doesn’t understand what proper boardroom reform means. Fund manager Hermes spoke for many at the annual meeting in June when it said it was “struggling to understand” how Pötsch, after 12 years as finance director, could be put in charge of a supervisory board whose duties include examining whether claims could be made against former executives.
The probe by public prosecuters concerns the timing of VW’s confession to investors that it had used illegal “defeat” devices to get around emissions tests. As such, it could be deemed secondary to the central question of how the devices were installed in the first place. But secondary does not mean unimportant: VW is aleady inundated with lawsuits that concentrate on the disclosure point.
Pötsch’s continuing presence at the top of the company adds complication on complication. In a rational world, he would stand aside until the German authorities have decided whether to bring charges. But he won’t.
