Does Hector Sants deserve to be knighted?

2 January 2013 3:17 pm | By Samuel Dale.

Former Royal Bank of Scotland chief executive Fred Goodwin and Zimbabwean president Robert Mugabe may be very different characters but will be forever linked as two of the most famous people to be stripped of knighthoods.

The banker formerly known as Sir Fred forfeited the honour last year without any regulatory or criminal sanction, as is usually required, but rather due to public anger over his role at RBS before it collapsed in 2008.

Goodwin may feel bitter to have been singled out and it sparked calls to strip knighthoods from all other leading bankers of the era such as ex-Lloyds Bank chairman Sir Victor Blank who bought HBOS in 2008. The storm subsided but the principle that those involved in the financial crisis should not be rewarded seemed strong.

It was therefore very strange to see another relic of the financial crisis, former FSA chief executive Hector Sants, given a knighthood in the New Year’s Honours List.

The decision has been met with almost universal outrage from advisers with comments on the Money Marketing website describing it as a “disgrace”, “a sick joke” and a “spoof”.

It comes shortly after Sants accepted a job as Barclays head of compliance and Government and regulatory relations. He quit the regulator in June 2012 after five years at the helm and continued to receive his £500,000 salary plus benefits until the end of last year.

So just why has Sants been honoured? The honours system professes to reward moral courage, those who enhance Britain’s reputation and who make a difference to a community.

The Government website states: “The honours system recognises people who have made great achievements in public life and people who’ve committed themselves to serving Britain. They will usually have made life better for other people or been outstanding at what they do.”

Sants’ five years in charge of the FSA includes the collapse of the Royal Bank of Scotland, HBOS and Northern Rock, Libor rigging, the PPI scandal and interest rate swap misselling.

Some may argue that Sants inherited all of these problems when he took over in July 2007, having previously been managing director of wholesale at the regulator, but his tenure is hardly littered with success.

Chancellor George Osborne thought the FSA’s record was so appalling that he ordered its abolition in 2010 and it will cease to exist early this year.

Sants was unhappy with the decision to scrap the regulator and quit his role in June 2010 but Osborne persuaded him to stay to oversee the transition to a new regulatory framework.

Perhaps as part of this persuasion the prospect of a significant honour was dangled in front of Sants?

Anyone can nominate a person for an honour which is then passed to the Honours Appointment Secretariat. The committee is made of civil servants and experts in the field so Sants will have been judged by people from the finance or business community.

Someone of Sants’ prominence is likely to have been nominated by the prime minister directly but the cabinet office says nominations are confidential.

Awards Intelligence managing director Mark Llewellyn-Slade helps people get knighthoods, promising to “significantly increase” the chances of receiving one.

He says: “I expect Sants was put forward by the prime minister because he is well known so he doesn’t have to follow the normal process. There are certain roles that you automatically get honours for and leading the FSA is one of them. It comes with the territory and whether he has done a good job is another matter.

“He is probably the most controversial of those honoured in the New Year’s list.”

Sants predecessor John Tiner, who served from 2003 to 2007, has received a CBE but not the higher honour of a knighthood. It may be that Tiner has paid the price for being in charge in the lead up to the financial crisis.

The first FSA executive chairman Sir Howard Davies, who combined both chief executive and chairman roles, was knighted after three years in the job while still serving.

The same applied to his successor as chairman Sir Callum McCarthy who was knighted in 2005, just two years into the job.

The third, and final, FSA chairman Lord Adair Turner has yet to receive the honour but has the title Baron of Ecchinswell and is a member of the House of Lords. Bank of England governor Sir Mervyn King was knighted in 2011.

FCA chief executive Martin Wheatley and PRA chief executive designate Andrew Bailey might as well begin thinking about their trip to visit the Queen.

Surely it is only a matter of time before they are recognised. If the chief UK financial regulator for the last five years is knighted after Libor rigging, misselling and massive bank failures then it appears anyone can get one.

Samuel Dale is political reporter at Money Marketing