Banking Crisis - Treasury Contents

Supplementary memorandum from Tony Shearer

  In his evidence to the Treasury Select Committee on 25 February 2009 Mr Sants said that:

    1. the minute prepared by FSA employees in respect of the meeting with me and others on 14 April 2005 did not refer to concerns as to whether Kaupthing were "fit and proper"; and

    2. the forms that the Heads of Risk and Compliance completed when they left Kaupthing Singer & Friedlander did not say that they had been dismissed.

  This is neither the full story, nor the answer to the questions he was asked by members of the Select Committee.

  The full answer is that my colleagues and I gave our opinions on the qualities, experiences and competencies of the management of Kaupthing, as well as highlighting information that was in the public domain. One instance when we provided these opinions was at the meeting on 14 April 2005 (and my own contemporaneous note, a copy of which I have provided to the Select Committee, clearly shows that I did raise the issue of Kaupthing not being fit and proper at this meeting).

  But, as Mr Sants should have been aware, there were other contacts in April and during the summer of 2005 where these concerns were also expressed to the FSA; for example, two of my former colleagues have emailed Mr Fallon to tell the Committee of their own experiences. Mr Sants may, or may not, have been aware of these contacts as he was not himself at the FSA at the time, and can only rely on what people have said to him. I was, of course, there at the time.

  Also the sequence of events (in addition to the comments referred to above that we made about the Kaupthing management), all of which was known to the FSA at the time, was:

    1. the board of Singer recommended a cash offer as they refused to countenance an offer in Kaupthing shares as we did not trust the Kaupthing management;

    2. I decided I would not stay and work with Kaupthing and left at the end of November 2005;

    3. then the Finance Director resigned and left for the same reason;

    4. then the Head of the Bank resigned and left for the same reason; and

    5. then both the Heads of Risk and Compliance were fired, and, based on what they both told me, explained the facts orally to the FSA.

  Accordingly there were a number of warning flags for the FSA to respond to, other than what might, or might not, have been said in the forms completed by the Heads of Risk and compliance.

  Nor Mr Sants did say that neither of the Non-Executive directors that he placed so much reliance on asked to see either of the Heads of Risk or Compliance to ask why they were leaving. Nor did he refer to the results of the Arrow report into Kaupthing Singer & Friedlander in the autumn of 2008.

  For all these reasons Mr Sants' answer was at best so incomplete as to be misleading.

  Mr Sants was also asked about the protection that the FSA gave to whistle-blowers. He did not answer this question but chose to answer the question of whether he took whistle-blowers seriously.

  The facts are that the FSA never took seriously the opinions of any of the people from Singer & Friedlander in 2005, 2006, 2007 or even when I wrote to him in April and May 2008.

  Since my evidence he and the FSA have tried to downplay my evidence. Hardly the actions of taking whistle-blowers seriously, let alone encouraging them to come forward by their treatment of them. This, as far as I can see, is also the situation relating to the former Head of Compliance at HBoS, regardless of whether his allegations are correct or not. Rather than protecting him, Mr Sants and the FSA have attempted to ridicule and marginalise him.

5 March 2009

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