Cable alerts FSA to worries about Spanish group's corporate governance

Vincent Cable, the Liberal Democrats' Treasury spokesman, waded into the Abbey National takeover debate yesterday by warning the City regulator of his concerns about Banco Santander Central Hispano's ability to manage the UK bank.

At a time when the government has been keen to take politics out of merger situations, particularly on competition grounds, Mr Cable wrote to John Tiner, chief executive of the Financial Services Authority, after receiving representations from concerned parties.

He said there were questions to be asked about the corporate governance of Banco Santander, which is chaired by Emilio Botín. "Representations have been made to me over the complexities of nepotism on the board of Banco Santander with four members of the Botín family sitting on the board, the latest in a line of family members to sit on the board, despite a stake totalling only 2.8%," Mr Cable said.

Mr Botín's sons Javier and Emilio are on the board as is his daughter Ana Patricia, who was in London for a presentation yesterday in her capacity as chairman of Banesto, the Spanish bank rescued by Santander.

"Further to this I have had concerns aired to me that the board has been in receipt of abnormally high bonuses, pension packages and payoffs with two board members, Jose María Amusátegui and Angel Corcóstegui who left in 2001 and 2002 respectively, receiving payoffs totalling £108m.

"The issues are important because they raise questions over whether in the absence of external scrutiny of decisions there are sufficiently robust arrangements for managing risk."

Liberal Democrat party member Warren Edwardes said he had raised the issue of boardroom structure - but not pay - with Mr Cable.

"My concern stems from being a policyholder of the Equitable [Life] and a mortgage and cheque account holder of the Abbey. The Equitable fell as a result of strong management by one powerful individual. Operational risk arose in the form of weak checks and balances."

The FSA refused to comment on the letter. A spokesman for the Spanish banking group said: "Santander's corporate governance standards are entirely appropriate for an international banking group."

When asked earlier about more general corporate governance issues, general manager Juan Inciarte said the bank had a "very high" rating from European corporate governance agency Deminor.

Mr Cable raised his concerns days after the Dutch government, which holds the EU presidency, had tried to use the the Santander takeover as a way to highlight the case for easing the process of pan-European mergers that could prevent US "megabanks" buying their way into the region.

Frits Bolkestein, internal market commissioner, wants to revise the EU banking directive of 2000 so the "prudential rules" allowing national regulators to block mergers to be more narrowly defined.