FSA top job to split on Davies exit

Jane Padgham12 April 2012

THE TREASURY is expected to split the role of chairman and chief executive at the Financial Services Authority (FSA) for the first time, forcing Gordon Brown to find two replacements for Sir Howard Davies .

Davies's shock departure from the City's main watchdog to head the London School of Economics will be seized by the Treasury as an opportunity to adhere to the Cadbury Report's recommendation that the top two roles should be separate.

The proposal, although aimed at the private sector, was mooted when the FSA was formed but was never adopted. The Treasury sees Davies's departure as an opportunity to apply the Cadbury principle.

His four-year tenure was marred by the collapse of Equitable Life, a host of mis-selling of pension and investment schemes and the debacle of split capital investment trusts. The Treasury will be hoping that appointing two respected figures will give a much-needed boost to the watchdog's reputation.

The Cadbury Report in 1992, and reports from the Greenbury Committee in 1995 and the Hempel Committee in 1998, laid down ground rules that roles should be separated at the head of an organisation. The chairman is responsible for running the board while the chief executive's role is managing the business. Combining the roles was seen as risking too much domination over decision-making.

A Treasury spokesman said a review into whether the roles should be split would be completed by the time of Davies's departure at the end of September next year.

City bookmakers have installed Andrew Crockett, the outgoing head of the Bank for International Settlements, as early favourite for one of the posts. Crockett was tipped to replace Sir Edward George as Governor of the Bank of England before Deputy Governor Mervyn King was named George's successor last month. Another strong candidate is John Tiner, FSA managing director responsible for insurance and investment. Gus O'Donnell, Treasury Permanent Secretary, is joint second favourite alongside Tiner.

Other names in the frame include Carol Sargeant, FSA managing director for risk, and Michael Foot, another FSA managing director. DeAnne Julius, a former member of the Bank's monetary policy committee, is seen as an outside bet.

Also mentioned have been Ron Sandler, who conducted the Treasury review into retail financial services, and Paul Myners, who carried out its pensions review. Liffe chairman Sir Brian Williamson, Customs & Excise chairman Richard Broadbent and former Bank Deputy Governor David Clementi are all seen as being in with a shout for one of the top FSA roles.

Davies will take over from Anthony Giddons, architect of Prime Minster Tony Blair's textbook The Third Way, who has been director of the LSE since 1997. One of his first tasks will be to push forward the LSE's attempts to raise £100m. He had been due to retire from the FSA on 31 January 2004. But he will join the LSE on 1 October next year.

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