NatWest chairman never felt so embarrassed as IMF meet

The chairman of NatWest told staff he never felt so embarrassed as he did at the International Monetary Fund meeting in the wake of the UK's disastrous mini-budget, as he warned about government plans to boost the competitiveness of City firms.

Sir Howard Davies told hundreds of employees at NatWest, which is still 48% owned by the state that ex-chancellor Kwasi Kwarteng s package of unfunded tax cuts for the wealthy in late September triggered a market meltdown and scarred the UK's reputation, according to a recording reviewed by the Guardian.

I was at the IMF conference while all this was going on and Kwarteng was there. It was embarrassing, because he was then summoned back to the UK to be sacked. The perception of the UK was terrible, said Davies, who spoke to hundreds of staff at the private event held in early November for the group's legal, governance and regulatory affairs division.

Davies, who was chairman of the former Royal Bank of Scotland since 2015, said banking peers and regulators, including those at the European Commission, tried to comfort him like colleagues would if you had an ill parent.

It was a bit like that with people coming in to say I m sorry to hear about your economy and your government. I m sure it is not so bad. You say, well actually, it probably is. It's about as bad as you think. It was awful, I never felt so embarrassed internationally, he said.

Kwarteng returned from the meeting in Washington in mid-October to be sacked by then-prime minister Liz Truss.

Davies, who was the head of the Financial Services Authority FSA before it was split in the wake of the 2008 banking crash, told employees he was concerned about the way the government was planning to boost the competitiveness of City firms.

The Treasury plans to have regulators at the Bank of England and Financial Conduct Authority review how regulation will affect the way UK-based banks and other financial firms compete with international rivals.

Campaigners and former politicians, including ex-business minister Sir Vince Cable, have warned that the rules, which are being introduced through the broad-ranging financial services and markets bill, will cause excessive risk-taking and could cause the same conditions that have been blamed for the 2008 banking crash.

Davies, who served as chair of the FSA between 1997 and 2003, said he was not keen on the competition clause, which went further than the guidance laid out prior to the financial crisis. He said that the FSA had to prove that issues such as competitiveness were not something you were trying to achieve directly. In my view, it could be the thin end of a rather peculiar wedge. Why would the regulators not come in and tell us to cut our cost-income ratio? If they had a competitiveness objective, it seems that they would give them an in to the way we run our business, which I think would be a bit tricky, and that is one reason why the regulators aren't very keen on it. He claimed that the ministers were talking about the new competition rules as one of the supposed benefits of Brexit. He said that we need to be able to identify some things that we would not have done without Brexit. It is not a great place to start in my view to think about how to regulate a financial sector, and that is all I ll say on that.

NatWest and the Treasury didn't want to say anything.