Hector Sants resigned as the chief executive of the Financial Services Authority (FSA) yesterday hours after a meeting with George Osborne, who wants him to take a role at the Bank of England if the Conservatives win the next general election.
The Tories plan to water down the strength of the City watchdog, favouring a handover of its financial sector supervisory role to the Bank and leaving the FSA to concentrate on consumer finance. The Conservatives are understood to have spoken to Mr Sants about becoming a deputy governor at the Bank after the election.
The Conservatives confirmed yesterday that the meeting had taken place, but refused to be drawn on any job offer for Mr Sants. "In the many dealings I have had with Hector Sants I have found him to be an intelligent, diligent and committed public servant," Mr Osborne, the shadow Chancellor, said. "He steered the FSA through very difficult times and deserves credit." Sources close to the Tories said they doubted that Mr Sants' career in public service was over.
Mr Sants, who has been critical of Tory plans to cut back the FSA's responsibilities, describing them as likely to lead to a "turf war" between the FSA and the Bank, is thought to be only lukewarm about moving to Threadneedle Street. Having led the FSA for three years, he is unwilling to take a more junior position, and any attempt to move him in to the Bank is likely to be met with resistance.
The Bank already has two deputy governors, including Paul Tucker, who is responsible for financial stability. Both have fixed tenures. There are also many in the Bank who are uneasy about the lack of clarity over what it is expected to oversee, especially in relation to regulation of the stock market, insurance companies and the futures market, having never regulated these parts of the financial industry in the past.
The FSA was formed by Labour in 1997. The Government still favours a tripartite regulatory system, including the FSA, the Bank and the Treasury.
"Hector Sants has been at the centre of the UK's efforts to confront the global financial crisis over the last two and a half years," the City minister, Lord Myners, said yesterday. "Over that time no depositor with a UK bank has lost any of their savings and our interventions have emerged as models for other nations to follow. Hector can be proud of the part he played in these achievements," he added. The House of Commons Public Accounts Committee yesterday said that the financial crisis had nonetheless cost the taxpayer £850bn.
The FSA insisted that Mr Sants' departure was in line with his long-stated intention of doing the job for three years. The regulator said that Mr Sants would remain in office until the summer, but refused to say whether he would leave before or after May, the expected date of the general election. Sources close to the FSA indicated that either Jon Pain or Sally Dewar, the two executives who report to Mr Sants, could take over on an interim basis. A spokeswoman said that a successor would be named in due course, and would be selected by the FSA's board and the Treasury.
Vince Cable, the Liberal Democrats' Treasury spokesman, who has been critical of the FSA's failure to stop banks such as Royal Bank of Scotland running out of control in the months leading up to the start of the financial crisis in 2008, said that the timing of Mr Sants' departure was unhelpful.
"We are still in the middle of a crisis and the FSA has an important part to play in effecting far-reaching and lasting change. There were failures in the past but the resignation of Hector Sants will plunge it into a great deal of uncertainty," he said.
In a memo to staff, the FSA's chairman Lord Turner conceded that Mr Sants' resignation was unsettling, "particularly in the run-up to the general election". Lord Turner said that he would remain at the FSA.Reuse content