Gamekeeper turns poacher: FSA's Sergeant joins Lloyds TSB

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The Independent Online

The City regulator whose department last month inflicted one of the largest financial penalties for mis-selling on Lloyds TSB revealed yesterday she is taking up a senior job with the high street bank.

Carol Sergeant will step down at the end of next week from her position as head of enforcement at the Financial Services Authority, the department which makes sure companies are abiding by its rules and penalises them if they are not. Ms Sergeant joins Lloyds in the newly created role of chief risk director in February. Ms Sergeant will go on gardening leave in the intervening period so that Lloyds' rivals do not feel it has gained an unfair advantage by hiring someone who has access to their innermost workings.

Ms Sergeant's department fined Lloyds £1.9m last month and forced it to pay £98m in compensation after it found the bank had mis-sold so-called precipice bonds. Lloyds also ran into trouble with the regulator last year over the sale by its Abbey Life and had to pay out £165m in compensation.

She was passed over for the top job at the regulator in July when John Tiner, previously head of insurance, was named as the new chief executive. Ms Sergeant was approached at about the same time about the Lloyds job. Ms Sergeant said in an e-mail to staff yesterday: "You should know that the executive members of the FSA board and Andrew Procter [enforcement director] were made aware as soon as I was approached and I had nothing to do with the [Lloyds] enforcement decision."

Ms Sergeant, who joined the FSA in 1998 and previously worked at the Bank of England, is on a £298,000 salary. At Lloyds,it is likely to be around £400,000, on top of which she will also be eligible for a bonus. The FSA is expected in the next couple of weeks to announce sweeping changes to its management structure, to reflect its move from a phase of devising policies for how it will police the City to actually implementing those policies.

It is expected to keep the structure of having three managing directors below the chief executive and chairman, but they are likely to have different responsibilities.