Abbey board 'pressure' caused losses

BELEAGUERED Abbey National boss Ian Harley's shaky grip on his job has been weakened further by an attack from one of his former boardroom colleagues. Gareth Jones, former head of the wholesale division, claims in a letter to chairman Lord Burns that he was persistently pressurised by the rest of Abbey's board into making high risk investments, in the hope they would generate high returns.

Abbey admitted last week that its profits would be hit by multi-million pound junk bond write-offs. Jones, who left in October with a £1.8m pay-off, believes he has been unfairly blamed for the fiasco. He claims that in 1997 he was put 'under increasing pressure' to invest in junk bonds and that the board ignored his warnings that they were risky. Jones claims he again came into conflict with Harley after Abbey fought off aggressive takeover moves by Lloyds TSB.

In a management conference-called 'Life after Lloyds,' consultants McKinsey laid out ambitious plans to transform the former building society into one of the world's top five banks by 2005. To achieve that aim, Jones says he was expected to increase profits in his division from £500m to £1.5bn.

He says he resigned after the board overruled his objections that the plan 'would substantially increase our risk'. He also claims he warned Harley's lieutenant, Mark Pain, to take out credit insurance against a $500m exposure to US conglomerate Tyco.

Shares in Abbey fell by almost £2 to 810p last week, on worries over bad debts and the capital strength of its life assurance operation, Scottish Mutual. A spokeswoman said it was 'not true' that Jones had been pressurised into buying junk bonds, or that he had issued warnings.

Contenders are already being touted to replace Harley, including Coutts boss Gordon Pell and Northern Rock supremo Adam Applegarth.