London: HSBC was facing a political blacklash yesterday morning as it prepared to name a multi-millionaire investment banker as its next chief executive.
After a dramatic and bitter power struggle at the top of one of the world's biggest banks sparked by chairman Stephen Green's decision to become trade minister, the current chief executive
Michael Geoghegan appears have lost out and will leave after a 37-year career at the bank.
Geoghegan is to be replaced by the head of the investment bank, Stuart Gulliver, while the chairman's slot is to be filled by the highly regarded finance director, Douglas Flint.
The boardroom upheaval is unprecedented and it infuriated the Liberal Democrats, who criticised Barclays when it promoted its investment banking head, Bob Diamond, to chief executive this month. Gulliver is another "casino banker" and was the highest-paid banker at HSBC last year, with a package of more than £10 million (Dh57.6 million). Gulliver has tried to defend bankers' bonuses in the past, likening the situation to needing to pay Hollywood stars.
‘Too big to fail'
The Lib Dems are concerned that by appointing investment bankers to the helm of banks, the industry is not taking seriously its concerns about reducing the risk in banks.
Lord Oakeshott, the Lib Dem Treasury spokesman, said: "Britain's big banks are too big too fail and too big to care what Britain's government or people think. Investment bankers should not control our bank lending. It is the lifeblood of small business and homebuyers and it's slowed down to a trickle."
The sweeping changes being planned at HSBC are taking place as the coalition's banking commission set up to consider whether big banks such as HSBC should be broken up to reduce the risk of taxpayer bailouts makes its first public pronoucements on the issues it will consider over the next 12 months.
Only yesterday, Geoghegan had been defending the so-called universal banking model where the investment bank sits alongside the retail banking arm, declaring "universal banking works".
After days of speculation about the machinations inside an organisation that has traditionally prided itself on seamless management succession, the extent of the boardroom tussle was becoming clear today. Banks rarely replace two such crucial boardroom posts at the same time for fear of sparking concerns about instability.
The Financial Services Authority needs to approve the appointment of bank bosses and since the financial crisis it has begun to interview the candidates to ensure they have the capabilities required. It is not yet clear if the regulator has approved HSBC's plans.
The 18 members of HSBC's board are not due to assemble in Shanghai until Wednesday to ratify the new team. HSBC is adamant that no decision has been made yet.
