Hector Sants, the chief executive officer of the U.K. Financial Services Authority, will step down at the end of June after leading the regulator through much of the global financial crisis.
Sants, 56, also won’t lead the Prudential Regulation Authority, a unit of the Bank of England that will be responsible for banking supervision starting next year, the FSA said in an e-mailed statement. Andrew Bailey, head of U.K. banking supervision, will take over Sants’s role on an interim basis.
As head of the FSA, Sants was a key figure in the 2008 negotiations that led to the collapse of Lehman Brothers Holdings Inc., with one book saying he prevented Barclays Plc from buying some of its assets. The FSA had been heavily criticized over the near collapse of Northern Rock Plc and Royal Bank of Scotland Group Plc.
“I know he’s worked very hard since the crisis,” Richard Reid, research director for the International Centre for Financial Regulation, said in a telephone interview. “He’s worked tirelessly to try and recover some of the reputation of the FSA,” said Reid, a former colleague of Sants at UBS AG.
This is the second time Sants has resigned from the FSA. He announced his departure in February 2010, but later agreed to stay on after the government proposed handing supervisory powers to the Bank of England. Before joining the FSA, Sants was an executive at Credit Suisse Group AG, where he led the bank’s European, Middle East and Asia business.
‘Proud’ of Achievements
“I am proud of what the FSA has achieved during my time in charge, through what have been incredibly challenging times,” Sants said in the statement. “I would like to thank all of my colleagues for their dedication, support and hard work. I know I leave the organization in very capable hands.”
“I am sad that Hector Sants has decided to stand down,” Mervyn King, governor of the Bank of England, said in an e-mailed statement. “I am very grateful to him for staying on for longer than he had planned.”
Sants, who was paid 806,0000 pounds ($1.27 million) in the last financial year according to the FSA’s annual report, will have to wait another six months after his departure until he can start another job. He would have been a deputy governor of the U.K.’s central bank had he stayed.
Margaret Cole, the FSA’s former director of enforcement, said last month that she would leave the agency. She became at least the 10th senior official to leave the regulator since the government said in 2010 it would abolish the FSA and replace it with the PRA and a consumer watchdog called the Financial Conduct Authority.
Andrew Bailey, who is replacing Sants, “is intelligent, thoughtful and not at all gung-ho,” Simon Gleeson, financial regulation partner at Clifford Chance LLP, said in a telephone interview today.
“The problem with this job, if you’re advertising it to external candidates is that noone knows what it will entail 18 months from now,” Gleeson said.
“Change is traumatic for any organization and the FSA is no different,” Greg Brandman, a partner at Eversheds LLP and former FSA enforcement manager, said in an e-mailed statement. “Ongoing uncertainty about who will be at the helm during a period of radical regulatory change is bad for the FSA and bad for the City.”
A plan to save Lehman Brothers in the midst of the 2008 financial crisis fell through when Sants blocked an attempt by Barclays to buy some of its assets, according to “In Fed We Trust,” the book by David Wessel, a Wall Street Journal reporter.
Sants refused to waive regulations requiring London-based Barclays to hold a shareholder vote before guaranteeing Lehman’s liabilities, Wessel said.
As FSA CEO, Sants led a crackdown on banks’ misselling of payment protection insurance to consumers last year, which could cost lenders as much as 9 billion pounds in compensation.
“My biggest disappointment of my time at the FSA has been the failure of firms, in particular senior management, to learn the lessons of past misselling,” Sants said in a speech in London in June.
He warned in his most recent speech that the U.K.’s approach of assessing lenders using subjective judgments would collide with a European style of supervision that relies on “tick-box prudential regulation.”