William Hunt, chief of asset management at State Street, has resigned as a result of the ongoing turmoil created by the US sub-prime mortgage crisis.
In addition, State Street has announced a $279 million post-tax charge to cover any legal costs that it may incur. Less than a month ago, State Street had claimed that four of its off-balance-sheet vehicles had $29.2 billion of asset-backed commercial paper secured.
State Street is the first financial institution to see the departure of a top executive in 2008, although analysts believe that further high-profile dismissals and resignations are likely to take place in the near future. It also appears likely that other firms may set aside money for potential legal expenses.
Hunt, as is to be expected, will not be leaving without a sympathetic golden handshake, believed to be in the region of $14.1 million in severance pay and benefits, plus an additional $5 million in stock and retirement benefits.
The Boston based bank has been ducking inconvenient questions since Autumn 2007 about investments which were made in risky vehicles in light of the credit crunch. Hunt is to be replaced by James S Phalen until a new appointment is made.
Despite the development, shares in State Street rose $6.49, the equivalent of 8.2%, to close at $85.37 in New York trading.