Mini budget an ‘international embarrassment’ says NatWest boss | NatWest Group

The chairman of NatWest has told staff he has “never felt so embarrassed internationally” as he did at the International Monetary Fund meeting in the wake of Britain’s disastrous mini-budget, when he warned about the government’s plans to boost the competitiveness of City companies.

Sir Howard Davies told hundreds of staff at NatWest – which remains 48% state-owned – that ex-chancellor Kwasi Kwarteng’s package of unfunded tax cuts for the wealthy in late September, which triggered a market meltdown, caused “quite a significant problem” and ” scarring” of Britain’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 then he was called home to be fired … The perception of Britain was terrible,” Davies told hundreds of staff at the private event held for the group’s legal, governance and regulatory department in early November.

Davies, who has been 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 as colleagues would if you had a sick parent.

“It was a bit like that, [with] people coming in to say “I’m really sorry to hear about your economy and your government, I’m sure it’s not that bad”. And you say, ‘well actually, it probably is. Really – it’s about as bad as you think’.

“It was terrible, I’ve 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 also led the Financial Services Authority (FSA) before it was split in the wake of the 2008 banking crash, told staff he was concerned about the way the government planned to boost the competitiveness of City businesses.

The Treasury plans for regulators at the Bank of England and the Financial Conduct Authority to consider how regulation could affect the way UK banks and other financial firms compete with international rivals.

Campaigners and former politicians, including ex-Business Secretary Sir Vince Cable, have already warned that the rules, which will be introduced through the sweeping Financial Services and Markets Bill, will be a “recipe for excessive risk-taking” and could create the same conditions as the has been blamed for the 2008 bank crash.

Davies, who served as chairman of the FSA between 1997 and 2003, said he was “not concerned” with the non-compete clause, which went further than guidance put out before the financial crisis. At the time, he said the FSA only had to prove that issues such as competitiveness were “taken into account” and were not something “you were trying to achieve directly”.

“In my view, giving the regulator the goal of promoting competitiveness may be the thin end of a rather peculiar wedge. I mean, why wouldn’t the… regulators come in and tell us to cut our cost-to-income ratio? It will improve our competitiveness. And if they had a competitiveness measure, it seems like that would give them an “in” into the way we run our business, which I think would be a bit difficult, really, and that’s one reason the regulators aren’t very concerned off on it, too.”

He claimed ministers were talking about the new competition rules as one of the “supposed benefits of Brexit”.

“It’s kind of driven by this notion that we need to be able to identify some things that we’ve done that we wouldn’t have done [without] Brexit. It’s not a great place to start in my view to think about how best to regulate a financial sector, and that’s all I’ll say about that,” he told staff.

NatWest and the Treasury declined to comment.

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