Former chairman of the Financial Services Authority, Sir Callum McCarthy, knows all too well the scale of the restructuring going on in the financial services sector.
So the 67-year-old seems well-placed to capitalise on this change by heading a new investment and mortgage operation called Castle Trust, backed with £65m from private equity group JC Flowers.
The venture will offer retail and institutional investors an investment product, linked to UK house prices, which aims to outperform the Halifax House Price Index.
It will also launch a scheme called a “partnership mortgage” offering borrowers with a 20% deposit a further 20%, with the remainder needed from a primary lender. There are no monthly repayments, but Castle Trust will take a share of any uplift in value when the borrower sells the property.
The hope is that borrowers will seize on the product to lower their repayments with their primary mortgage lender (as they will effectively have a bigger deposit) or use it to enable them to buy a more valuable property.
Castle Trust will keep 40% of any increase in the property’s value, with the borrower keeping the remaining 60% of any increase. If the borrower sells their property at a loss, Castle Trust will share 20% of that loss.
McCarthy has assembled a high-profile team. It includes EG columnist John Gummer, the former Conservative cabinet minister who is now chairman of the Association of Independent Financial Advisers; and Dame Deirdre Hutton, a director of HM Treasury and former deputy chair of the FSA. McCarthy is also a non-executive board member of HM Treasury.
The former Manchester Grammar School boy and Oxford graduate went from the Department of Trade and Industry into a banking career in the mid 1980s.
He was director of corporate finance at investment bank Kleinwort Benson and then joined Barclays to head its operations in Japan and North America.
McCarthy was lured back to the public sector for stints at gas regulator Ofgas and super-regulator Ofgem.
He attracted praise in some quarters for introducing greater competition in the gas and electricity markets, but his rise was not trouble-free.
Some ministers complained that his overhaul of electricity pricing was in part responsible for the downfall of privatised British Energy.
In 2003, the keen beekeeper took up the role of chairman of the FSA, committing himself only to five years in the post. That period fell just before the credit crisis, and he faced heavy criticism for not doing enough to warn of the dangers of the borrowing binge that led to the banking meltdown.
Having to explain the regulator’s handling of the Northern Rock debacle to the Treasury Select Committee must have stung.
These days, the future of the FSA remains uncertain, but McCarthy, who joined JC Flowers as European chairman in 2009, now has other things to get stuck into.
