Banking on Confusion: A Snail's Pace and Midnight Eclipses

Kate Forbes insists that the future SNIB advisory group, to provide oversight regarding SNIB objects, conduct and performance, must ignore "existing governance structures"

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OBSERVING Holyrood general questions is normally as exciting as a snail on a treadmill, and often about as helpful as a mime on the radio. However, sometimes it’s worth the time invested.

In this case, Deputy First Minister and Cabinet Secretary for Economy Kate Forbes has opened the door on the Scottish National Investment Bank.

As for her contribution, it regards the long running saga of the missing advisory group, mandated by an act of parliament yet still missing in action. It’s purpose, for those who are unaware, is to provide Scottish Government ministers with advice to aid them in conducting oversight regarding SNIB objects, conduct and performance.

Yet Ms Forbes leaves me feeling as if I’ve just watched a solar eclipse at midnight. Fascinating yet completely unhelpful.

Douglas Lumsden MSP engaged in a gentle tête-à-tête with the SNP second in command, opening with questions on whether the SNIB is operating legally. After all, the advisory group mandated by law still does not exist. Ms Forbes parried with a welcome revelation that after four long years the SNP have finally managed to stitch together a shortlist of group potential members.

Better late than being the early bird who didn’t get the worm I suppose?

Douglas Lumsden, receiving her parry, thrust back with the observation the bank has managed to spend £9.7m on salaries for only 64 people in the space of one year. He queried whether the public can really have much confidence in the SNIB not turning out to be another SNP gravy train.

Next came the moment for Ms Forbes midnight eclipse.

She casually drawled that the advisory group designed to provide minister (like herself) with advice to aid in conducting oversight regarding SNIB objects, conduct and performance…won’t have anything to say about existing governance procedures.

You read that correctly. The expect advisory group to be tasked with providing forensic expert advice to help oversight of SNIB conduct and performance…will have zero remit regarding governance structures and procedures.

This is stranger than a cat barking at the postman.

Conduct regulation in banking is all about holding institutions responsible for their actions. In other words, it represents a set of rules that tell financial firms what is expected and of acceptable behaviour.

And the purpose of an advisory group charged with providing expert advice regarding conduct of a national investment bank would require them to at least occasionally glance at structures of governance. Surely?

But not according to our Deputy First Minister. What are we to make of this folks?

If one is to be generous, perhaps Ms Forbes misspoke or chose her words thoughtlessly. Or perhaps she gave the game away, revealing that the missing advisory group will - if the SNP government gets its way - end up toothless.

Meanwhile the SNIB continues to find itself mired in question marks as to its operating procedures, investments and conduct.

One example of the question marks would include potential conflicts of interest resulting from existing structures.

For instance the SNIB has provided seed capital (taxpayer money) to companies where senior figures have also served – by ministerial appointment – on Scottish Government advisory boards.

The CEO of biopharmaceutical firm Elasmogen, Ms Caroline Barelle , who was appointed to a Scottish government enterprise and skills strategic board by the SNP administration in January 2020. She continues to be a member of the board. While serving on this advisory board, the firm she was CEO of would receive in May 2022 £3.5 million in taxpayer dosh from the SNIB.

For those interested, the Scottish government enterprise and skills strategic board expenses billed to taxpayers for 2020/21 was £2,517.50; despite it being the year of lockdown and work from home. So, while these advisory boards are important to grant expert insight and advice to government officials and ministers, they are not free. Some boards grant remuneration for members and expenses can be incurred. In the case of the Scottish government enterprise and skills strategic board, prior to Covid there were £34,541.20 expenses charged to taxpayers (2018-19)

Naturally it is important highlight that Elasmogen and the other firms in question deny that the investment involved any conflicts of interest. And this could easily be true, but given the SNIB’s investment strategy concerning diligence practices makes zero mention of how the SNIB handles potential conflicts of interest, it is relevant to raise the issue.

If only there was an advisory group populated by experts who could provide Scottish Government ministers with advice about why it’s important the SNIB has a public investment strategy mentioning how it handles potential conflicts of interest! Mind you, that might involve them paying a passing heed to “existing governance procedures”

Ms Forbes won’t have any of that.

Then there was the time the SNIB managed to lose millions of taxpayer dosh in the DRS debacle.

In that instance taxpayers stand to potentially lose all £9m the SNIB invested. But don’t worry, the SNIB Chair Willie Watt has admitted that while taxpayers will almost certainly lose 50% of an SNIB loan to Circularity Scotland of £9m he hopes “that they [taxpayer losses] are less than 100%.”

Private investors waited before investing in the DRS debacle until they had ascertained its legality and whether or not the UK Government would intervene. But not the SNIB, they just drove straight on in with a £9m investment.

Now that’s the sort of thing that would merit an expert panel of advisors providing insights for Scottish Government ministers to consider regarding “existing governance procedures”, especially regarding risk management.

But Ms Forbes insists that would be about as welcome as a cold sore at a kissing booth.

Then there was the time when SNIB Senior Executive Eddie McAvinchey reportedly said the SNIB’s risk management committees are “terrible”.

“Some of what DC [former head of investment] said was just rubbish. Our committee processes are terrible here…I think risk as screwed this up”

Disruption Banking’s reporting tells of committee processes which weren’t thought through. Perhaps as a consequence of senior staffing vacancies and turnover, “there was no true accounting or appropriate experience to approve deals”

But today we learn that the SNP government views any advisory group providing any advice or expert views on “existing governance procedures” is about as welcome as a hiccup in a eulogy. Guess SNIB’s risk department can keep screwing things up then? Ms Forbes has never seemed to mind, given I cannot find a single speech made by her concerning these matters.

Ultimately today’s revelations from Kate Forbes leaves me feeling like I’ve been listening to a GPS that only tells me where I’ve already been. One step forward, we should see the advisory group as mandated by law finally established. Two steps back, it’ll be toothless and won’t provide Scottish ministers with expert opinion regarding anything concerning actual governance structures.

I guess oversight in devolutionary Scotland is as outdated a concept as a flip phone at a tech conference.

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SNIB related interviews

For those interested, here are two interviews regarding the SNIB I’ve undertaken over the last 12 months.

The first was with Douglas Lumsden recorded a few months ago. We sig into the SNIB a fair bit in the first half before going onto discuss the ferry fiasco.

And here is my interview with Disruption Banking’s Harry Clynch who has - like myself - been reporting regularly on the SNIB saga. His articles have been excellent, he’s a smart chap.