Hector Sants, Britain's top financial regulator during the 2008 banking crisis, has been awarded a knighthood, weeks before he takes up a new post at Barclays bank on a pay package worth a reputed £3m.
Sants, who stepped down as chief executive of the Financial Services Authority in June, steered the regulator through a period of unprecedented turmoil. Two years ago he was persuaded by George Osborne to stay on to help lay the ground for a new regulatory regime to succeed the FSA, which comes into effect early next year.
Sants was criticised in some quarters for failing to see the crash coming, as well as for the feeble penalties meted out to a small number of bankers linked to failing financial institutions.
A month after the government bailouts of Royal Bank of Scotland and Lloyds Banking Group in 2008, the Queen described the banking crash as "awful", asking: "Why did nobody notice it?"
This month during a visit to the Bank of England, she inquired whether the FSA "did not have the teeth" to keep the banks in check – a question she will now get to ask Sants in person.
By recommending Sants for a top honour, ministers are signalling their unequivocal gratitude for his contribution to keeping the banking system from systemic meltdown.
Sants' version of events is that he had expressed misgivings about the "light touch" nature of FSA regulation long before the US subprime mortgage crisis exploded into a global banking shock in the summer of 2007.
After his promotion to lead the FSA in July that year there was nothing he could have done, he said, to prevent Northern Rock spiralling toward nationalisation or RBS's disastrous acquisition of its Dutch rival ABN Amro. The goal had become one of crisis management and damage limitation.
Osborne, who announced the abolition of the FSA as one of his first moves as chancellor in 2010, has always been careful to exempt Sants from his savage analysis of the regulator's track record. On news of his departure from the FSA, the chancellor described Sants as an "outstanding public servant".
Osborne wanted Sants to become the first chief executive of the Prudential Regulation Authority, one of the new bodies to succeed the FSA, but in March Sants announced he would step down before the PRA came into operation.
This month it emerged he was taking up a newly created post at Barclays, tasked with overhauling the bank's regulatory compliance procedures.
Barclays has received four fines totalling £70m from the FSA in less than three years, the largest and most recent being a £59.5m penalty for misconduct relating to attempts over several years to manipulate the so-called Libor interest rates, used by banks lending to one another.
This year Barclays clashed with the Treasury over its aggressive approach to certain tax structures, leading to a unorthodox public announcement from the chancellor that he had moved to block two "highly abusive" tax schemes that could have cost the taxpayer £500m.
Also rewarded in the New Year honours list is Mridul Hedge, the former director of financial stability at the Treasury. From 2008 until this year she was the chief Treasury mandarin responsible for the government's intervention in the banking sector and for overseeing the taxpayers' multibillion-pound stakes in the most troubled finance houses. She becomes a Companion of the Order of Bath.
Sir Alan Budd, a civil servant brought out of retirement by Osborne to set up the Office for Budgetary Responsibility, receives a Knight Grand Cross.
A smattering of business leaders appear in the list, but names from the banking industry are once again conspicuous by their absence. Those receiving CBEs include Nicholas Ferguson, the BSkyB chairman and former private equity boss, for philanthropy and services to education. Ferguson once sparked outrage when he observed that private equity millionaires paid less tax than their cleaners.
Peter Marks, chief executive of the Co-op Group, Tony Pidgley, chairman of Berkeley Group, and Martha Lane Fox, co-founder of Lastminute.com, are all honoured.
Michael Terrett, the chief operating officer at Rolls-Royce, is awarded a CBE. Rolls-Royce is facing investigation by the Serious Fraud Office over allegations of bribery linked to aero-engine contracts.
The lord mayor of London, David Wootton, a former corporate lawyer, is to receive a knighthood.
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image: © Barclays