Strategy & Operations » Leadership & Management » Lehmans 10 years on: Where are the financial crisis CFOs?

Lehmans 10 years on: Where are the financial crisis CFOs?

Finance leaders at the big banks hit by the financial crisis have not only managed to make a comeback since the crash- many have enjoyed further career success.

When investment banking giant Lehman Brothers was bankrupted 10 years ago the storm that threatened to bring down the entire global system was at its peak. Many of the CEOs running UK banks engulfed by the growing financial crisis would become infamous.

Adam Applegarth, chief executive of mortgage bank Northern Rock that collapsed in 2007, was already a household name after the first run at a major bank in over a century.

Fred Goodwin, the reckless CEO of Royal Bank of Scotland (RBS), would become the hate figure of the crisis and ultimately lose his knighthood after a disastrous buying spree destroyed the world’s biggest bank.

But somewhat off the radar, the CFOs that were at the heart of the maelstrom have largely managed to not only rebuild their careers, but even thrive by carefully managing their comebacks.

Making a buck

David Jones, finance director of Northern Rock, paid a price for the strategy that resulted in the bank being nationalised in February 2018 before its ‘good bank’ was sold to Virgin Money.

In 2010, Jones was handed a life-time ban and fined £320,000 by the regulator Financial Services Authority (FSA) for allowing the bank to report mortgage arrears figures that were lower than they should have been.

At the time Jones said: “The FSA’s conclusions and imposed penalty are both unfair and disproportionate” and said he would “pursue opportunities either in an advisory or full-time basis” as the ban only stopped him taking on roles in any position that required the FSA’s authorisation.

The following year Jones set up Edinburgh-based consultancy Heriot Consulting which offers strategic and financial planning, amongst other things. When contacted, a member of staff there said Jones “has been retired for a period of months.”

He is also described on his linkedin page as being an associate director of Talent Focus, which specialises in executive search and specialist financial roles in the UK.

Bradford & Bingley, a smaller bank which overextended itself building out a vast buy-to let mortgage book, was also brought to its knees by the financial crisis.

Two weeks after the collapse of Lehmans, the government took control of its £50 billion of mortgages and loans and its savings, operations and branches were sold to Spanish bank Santander.

Chris Willford, its finance director at the time, managed to pick up a series of non-executive roles including a stretch on the board of the government pension initiative now called NEST.

Since 2011 he has been a director of cloud-based storage provider My Wealth Cloud and since 2016 has been Principal of the FD Centre, which provides part-time FDs. It says it is “working with SME business owners to achieve greater success through growth-planning.”

 The big beasts

RBS’s former finance director Guy Whittaker was the highest profile UK bank finance chief. He was hired with a £2.4m ‘golden hand-shake’ by Fred ‘the Shred’ Goodwin in 2006 amid calls for RBS to broaden its executive base from Scottish grandees.

His departure was announced in May 2009 just three days before RBS revealed interim losses of £857m. Since leaving RBS he has not held any positions or made any public appearances.

But perhaps most intriguing of all are the careers of the senior finance leaders of troubled mortgage bank HBOS that was later taken over by Lloyds TSB two days after Lehmans crashed.

The bank was sunk by its Irish business, claims Ian Smith, the then deputy CFO of HBOS who is now CFO of challenger bank CYBG- that recently acquired Virgin Money (owner of Northern Rock’s ‘good bank’).

Phil Hodkinson was HBOS’s finance director until leaving the bank in April 2008, after which he picked up non-executive roles including directorships at telecoms giant BT and insurer Friends Life as well as becoming chairman of the ABI’s Raising Standards Accreditation Scheme.

Mike Ellis retired from HBOS at the end of 2004 but re-joined in September 2007, becoming finance director in January 2008- leaving when HBOS was taken over. “He came out of retirement to try and help out, which is a measure of the man,” says Smith.

In 2011 he was appointed chairman of Skipton building society and stood down in 2017. Skipton’s CEO David Cutter said at the time: “Mike has provided outstanding leadership to the Board and overseen a significant improvement in the society’s performance.”

Lloyds Banking Group’s finance director after the merger Tim Tookey, who left the bank in September 2011 has certainly prospered since the financial crisis. CYBG’s Smith, who moved over to Lloyds Banking Group to become deputy CFO says of Tookey: “Tim was a different sort of individual, a different sort of mentor.

“I had a good relationship with him, but he was four years older than me, doing the group CFO role for the first time at Lloyds, and we struggled a bit for space,” he adds.

In 2011, Tookey became CFO of insurer Friends Life, staying until it was sold to rival Aviva in 2015. In April 2017 Old Mutual Wealth, later re-named Quilter, appointed Tookey as its CFO as it prepared for its flotation- a position he holds today. On joining, Old Mutual Wealth CEO Paul Feeney, said: “Tim is a big beast in the UK financial services industry and he has big plc, FTSE 100 experience which the board felt would enhance the experience of the team.”

Last November, Tookey gave evidence in a £550m high court case that centred on allegations that key information over the true financial health of HBOS was withheld from Lloyds shareholders before the takeover in late 2008.

Tookey is also a non-executive director of Nationwide Building Society, the UK’s largest mutual, where he is Chairman of the Board Committee. Also at Nationwide is Chris Rhodes, who was the finance director of mortgage bank Alliance & Leicester which also collapsed during the financial crisis and taken over by Santander. He has been there since January 2009, becoming executive director in April that year.

Avoiding the storm

At HSBC, Sir Douglas Flint continued as finance director through the financial crisis, having held the post since 1995, becoming chairman in 2010 until 2017. At Standard Chartered, the UK’s other big international-focused bank, Richard Meddings was FD for seven years until 2014, and is now on the supervisory board of Deutsche Bank and is executive chairman of TSB, that was spun out of Lloyds Banking Group. He took on executive duties at TSB after CEO Paul Pester resigned recently after a disastrous IT upgrade.

Both HSBC and Standard Chartered survived the financial crisis intact- but then were mired in separate controversies. In 2012 HSBC was fined $1.9bn (£1.2bn) by US prosecutors for failing to implement anti-money laundering controls.

In 2012 Standard Chartered was fined $640m (£458m) after it was found to have breached US sanctions on Iran. Two years later the bank was handed a further fine of $300m on top of a $340m penalty from 2012, this time over lapses in its money-laundering procedures.

Of the large domestic banks, only Barclays managed to avoid a government bail-out during the financial crisis. However, it has been the subject of an investigation by the Serious Fraud Office (SFO) over a £3bn emergency fundraising by Qatar in 2008.

Last May, a British criminal court dismissed fraud charges against the bank. But a criminal trial has been scheduled for January 2019 against former executives including its ex-CEO John Varley. Former finance director Chris Lucas, who stepped down in 2013 after six years in the role, has been listed as a co-conspirator but has not been charged.

What of the Lehmans CFOs and the other finance leaders of the collapsed Wall Street giants? Erin Callan, the most public face of the bank in the build up to the crash, lasted six months as CFO of Lehmans before being replaced by Ian Lowitt.

He was the bank’s final CFO, becoming the COO of Barclays Wealth America before joining commodity broker Marex Spectron as CFO and then CEO.

Sam Molinaro, the CFO of Bear Stearns- another former Wall Street titan, now describes himself on linkedin as an independent financial services professional in the Greater New York area.

But most intriguingly Nelson Chai, who served as CFO of Merrill Lynch until it was sold to Bank of America, was reported as starting as CFO of ride-share giant Uber last week.

Its one of many extraordinary career journeys of those who were once the finance chiefs of the big banks before it all came crashing down. Given the circumstances, they’ve done pretty well for themselves- on both sides of the Atlantic.

(Additional research by Amy Mason)

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