When questioned, a spokesperson for Richard Sharp referred Byline Times to the Bank of England
BBC Chairman Richard Sharp sat on one of the Bank of England’s key financial watchdogs while potentially making millions from conflicting business interests, Byline Times can reveal.
Sharp, who became chair of the BBC in 2021 weeks after allegedly helping former Prime Minister Boris Johnson secure an £800,000 loan – a claim that Sharp denies – was an external member of the Bank’s Financial Policy Committee (FPC) between 2013 and 2019, when he was also the Chairman of ‘Special Situations’ private equity fund RoundShield Capital.
RoundShield Capital invests some £2.54 billion on behalf of pension funds, endowments, foundations and other institutional investors into distressed businesses or new ventures. These enterprises are backed by underlying assets but are considered too risky to secure normal bank loans. There is nothing contrary to law about this sector, or Sharp’s work in it.
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At the same time, Sharp’s FPC enjoyed binding powers over the BoE’s Prudential Regulation Authority (PRA) – the body that sets the minimum levels of capital banks need to hold in reserve, affecting their ability to lend money for riskier opportunities.
A City source told Byline Times: “Special Situations Investment Funds generate high returns of between 10% and 25% a year by providing capital for opportunities where bank finance is unavailable.
“The conflict of working for a Special Situations fund while being in a position to affect the amount of bank debt available, the level of risk the regulator indexes for a type of loan, and the changes in the risk associated with the industry of the borrower, plainly leaves the powers of the FPC open to the perception that they could be abused.”
The source added: “An inside knowledge of how the Committee view risks in the credit markets, what’s on the financial horizon, and how it may use its powers to loosen or restrict access to debt, would give a huge edge to a Special Situations lender.
“Not only would it signpost where opportunities are likely to be found it would give insights into how to set the cost of non-bank debt.”
There is no suggestion of wrongdoing by Sharp, who is on record declaring his interests in RoundShield – which is regulated by the Financial Conduct Authority through its affiliate RoundShield Partners LLP – along with two other regulated companies, DII Capital Advisors and SW7 Asset Management.
Risk and Reward
However, the Bank of England (BoE) is facing scrutiny over its Code of Conduct rules, which allow external members of the powerful FPC to have conflicts of interest even where they create a “perception that a Committee Member… may obtain an unfair advantage… for example, by assumed access to information or policy thinking.”
Instead, the BoE says it seeks to “manage” such conflicts of interest by making judgements on a “case by case basis”, and requires members to self-declare conflicts so that they can be “recused” from any relevant “meeting or item discussion”.
A BoE spokesperson said: “All members of the Financial Policy Committee (FPC) are subject to a code of practice on managing conflicts of interests.
“This sets out the principles, guidelines and procedures for identifying, monitoring and managing actual or potential conflicts of interest.
“The code requires FPC members to declare any business interests that might be seen to create such a conflict to the Committee.”
Byline Times has examined the Code, which states that “relevant factors” to consider in the case of conflicts of interest include whether access to FPC information is likely to be commercially valuable to the areas of business its members are involved in.
Companies House documents for 2021, the last year in which Sharp was a member of RoundShield LLP, showed that some £5.4 million in profit was available for division between seven members, with the largest individual entitlement set at almost £2.2 million.
In 2020, Sharp was one of five RoundShield LLP members to enjoy a share in annual profits of £3.1 million, and in 2019 he was one of four members to share out almost £3.6 million.
RoundShield Capital does not make much of its commercial activity publicly known. However, its website does show that in 2017 it was involved in a £30 million housing development investment in Devon while Sharp’s FPC was setting mortgage affordability tests impacting borrowing for prospective homebuyers.
RoundShield also advised Puma Property Finance Limited as it secured £200 million of institutional funding in 2019 for property developments in the UK which were struggling to attract traditional bank loans, limited by the FPC’s ‘Countercyclical capital buffer’ ‘risk shock absorber’ system.
At the time David Kaye, CEO of Puma, admitted: “There are many high-quality real estate opportunities across the UK unable to access financing from traditional sources.
“This new partnership with the excellent team at RoundShield will enable us to continue to scale-up our activities.”
In 2020, Sharp’s RoundShield backed financial services provider Ampla Finance in making lending available to people wanting to quickly access inherited money before it cleared the probate system by offering a “managed alternative to high-interest short-term loans or credit card debt”.
We asked the Bank of England specifically whether Sharp had been required to declare a conflict of interest in respect of any of these RoundShield investments and whether any “management” had been required.
In response it cited the sections of its Code covering conflicts of interest generally, which include requirements that FPC members review their declaration to ensure it is up to date at least once a year.
It explained that the FPC also has discretion to determine whether a declared interest gives rise to “an actual or potential conflict” and whether members may continue to “participate in all the discussions and the decision-making process of the Committee unconditionally”.
A spokesperson for Sharp referred questions back to the Bank of England, while RoundShield did not respond to our request for comment.
The latest controversy raises a new conflict of interest question for former Goldman Sachs banker Sharp, whose appointment as chair of the BBC took effect just two weeks after he resigned from his role in RoundShield.
The circumstances surrounding his appointment to the BBC, following his alleged involvement in securing an £800,000 ‘lifestyle support’ loan for Boris Johnson, shortly after which he was named the Government’s preferred applicant for one of the biggest jobs in public life, is set to be scrutinised by independent barrister Adam Heppinstall KC after the Commissioner for Public Appointments William Shawcross was forced to recuse himself from that duty over his own previous contacts with Sharp.
Sharp says he is confident the appointment process was robust and fair, and in addition on Tuesday denied, when questioned by the House of Commons Digital, Culture, Media and Sport Committee, giving Johnson financial advice or helping arrange a loan.
In addition, it has been revealed that Sharp was the second largest shareholder in a healthcare company which was granted nearly £600,000 for COVID research while he worked in Number 10.
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