Mervyn Davies leaves banking for ministerial job

Stepping down as chairman of Standard Chartered, Davies becomes minister for trade and investment in the UK and has the challenging task of getting banks to start lending again.
Mervyn Davies has stepped down as chairman of Standard Chartered PLC with immediate effect after accepting a job as minister for trade promotion and investment in the UK. He will work under Peter Mandelson, the UK Business Secretary.

Standard CharteredÆs deputy chairman and senior independent director John Peace has been appointed acting non-executive chairman and will take over the helm at the UK-based bank for now. Meanwhile, Standard CharteredÆs nomination committee will lead the process of finding a new non-executive chairman.

A veteran banker who has managed to steer Standard Chartered safely through most of the financial crisis and one of the architects of the UK governmentÆs recent ú500 billion banking bailout plan, it is no wonder that Davies has caught the attention of Prime Minister Gordon Brown, but he is likely to be missed at his old workplace.

Davies joined Standard Chartered in 1993, became group CEO in 2001 and took over as non-executive chairman in November 2006. Under his leadership, both as chairman and CEO, the bankÆs strategy to focus on emerging markets in Asia, Africa and the Middle East, together with its disciplined approach to banking and its customer focus, have resulted in ôsignificant strategic and financial progressö, according to a release announcing his departure. The bank has doubled its income over the past five years through organic growth supplemented by acquisitions.

Davies says: ôIt has been my privilege to serve as director, CEO and then chairman of Standard Chartered. The bank is in great shape at a time when the industry faces many challenges. I am honoured to take up the new role with HM Government, but will be very sad to leave so many friends at Standard Chartered.ö

To be sure, Davies joins the UK government at a challenging time and as trade minister he will be charged with trying to get banks to start lending again in order to support business investment û a task that has eluded governments and central bankers around the world for the past four months.

But Davies, who already serves as head of Gordon BrownÆs Business Council for Britain, is perhaps one of the best placed bankers to take on this mandate, given Standard CharteredÆs skilful navigation of the credit crisis û although its focus on emerging markets, which contribute more than 90% of operating income, has clearly been helpful in terms of lowering the bankÆs exposure to toxic investment products. In October last year, he was appointed by Hong Kong Chief Executive Donald Tsang as one of 10 members of the Hong Kong governmentÆs task force on economic challenges, which was set up to help the city come to grips with the global financial crisis.

Unlike many of its UK and US peers, Standard Chartered has neither accepted bailout capital from the government, nor been forced to go hat in hand to large global investors in search of funds. Instead, it raised ú1.8 billion ($2.7 billion) from a November rights issue that was taken up by 97% of its shareholders. In connection with that issue, Davies said in a letter to shareholders that the bank is liquid, well capitalised and within its target range for total tier-1 capital. It also has a conservative balance sheet and meets all regulatory capital adequacy requirements. The capital-raising, he said, was intended to enable Standard Chartered ôto continue to build on its existing, very successful strategyö.

Davies, who is Welsh, spent his early years with Standard Chartered based in Hong Kong and immediately prior to assuming the group CEO position he was group executive director for North Asia.

His interim replacement, John Peace, was appointed deputy chairman and senior independent director to the Standard Chartered board in August 2007. He is also chairman of Experian PLC and Burberry Group.

Standard CharteredÆs share price plummeted 10.7% in London trading yesterday, although given the grim day in the market overall with several other banks falling by more than 10%, it was difficult to say whether any of that was to do with DaviesÆs departure.
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