City watchdog admits meeting oil giant Saudi Aramco over £2tn float

The head of Britain’s financial watchdog has admitted he met with Saudi Aramco before publishing heavily criticised rule changes which could attract the multi-trillion listing of the oil giant to London.

It comes after MPs warned the flotation must not compromise Britain’s “highly regarded” corporate governance standards.

“We can confirm that we held conversations with Saudi Aramco and their advisers in light of their interest in a possible UK listing in the early part of this year,” said Andrew Bailey, chief executive of the Financial Conduct Authority (FCA).

“We emphasised during those conversations that we were reviewing the Listing Regime.”

He added: “We do not think protections for investors will be weakened.

“We have previously made clear publicly that we will permit lower percentages than 25%, where the value and distribution is such that there can be a liquid market.”

He was responding to letters from Tory MP Nicky Morgan and Labour MP Rachel Reeves, who chair the Treasury and business select committees respectively.

They wrote to the FCA last month demanding it explain its proposals which would create a new category exempting state-controlled companies from certain rules that apply to other “premium” firms.

Aramco is planning to list 5% of its shares. The FCA plan would allow state-controlled companies to side-step rules that would otherwise oblige them to float at least a 25% stake to gain a premium status.

The London Stock Exchange could host the float under the proposed rule changes

Without the rule change, it might have to take a “standard” listing seen as less attractive for investors and companies, with lower corporate governance requirements.

London is battling with exchanges around the world to host the lucrative float of Aramco, which is said to be valued at more than $2tn (£1.55tn) – a figure that would make it the biggest share flotation in history.

A listing in the capital would be seen as a major victory for the City, especially as it faces the threat of losing parts of its business to Europe thanks to Brexit.

There has already been some opposition to the idea of bending the rules.

On Friday, the International Corporate Governance Network, whose members include The Coca-Cola Company, Microsoft and Nestle, became the latest to raise concerns about the proposals which it described as “fundamentally flawed”.

It said while the move “would be attractive to issuers and underwriters in the London market”, such a development would be “anathema” to high standards of corporate governance.

The FCA is reaching the end of its consultation on the proposals and aims to reveal its conclusions by the end of the year.

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