TSB boss Paul Pester will leave the troubled bank with a payout of nearly £1.7 million despite standing down in the wake of a botched IT switch and a string of ongoing technology failures.
The lender confirmed Mr Pester, who has been placed on gardening leave, will get £1.2 million in severance pay and a “historical” bonus of around £480,000 that is due from before TSB’s takeover by Sabadell in 2015.
All other performance-related pay has been frozen amid investigations into the recent IT failures.
Chairman Richard Meddings insisted the decision for Mr Pester to leave was by “mutual agreement” and denied his departure was linked to the IT migration failure and ongoing investigations.
Mr Pester’s departure on Tuesday comes after a seven-year stint at the top, which has been marred by the IT woes in April that left up to 1.9 million people using TSB’s digital and mobile banking locked out of their bank accounts.
It has suffered enduring IT issues since then, with TSB forced to apologise once more on Monday after many customers were again left unable to access their accounts.
Mr Meddings will now take on the role of executive chairman until a new chief executive is appointed.
Mr Meddings said: “Although there is more to do to achieve full stability for customers, the bank’s IT systems and services are much improved since the IT migration.
“Paul and the board have therefore agreed that this is the right time to appoint a new chief executive for TSB.”
Mr Pester said it had been a “privilege” to lead the bank, but admitted that the past few months have been “challenging for everyone at TSB”.
He has come under particular fire after the recent bungled IT switch, with MPs on the influential Treasury Select Committee calling for him to be sacked.
Treasury Committee chairwoman Nicky Morgan welcomed news of his departure and said “it is right” that he should step down.
She said: “Since the IT problems at TSB began, Paul Pester set the tone for TSB’s complacent and misleading public communications.
“The Treasury Committee, therefore, concluded that it lost confidence in Dr Pester’s position as chief executive of TSB.”
But she said his successor will need to restore confidence in the group, with the committee remaining concerned about the “continuing problems at TSB, including unacceptable delays in compensating customers who have been badly let down”.
TSB’s tech troubles were triggered by a migration of customer data from former owner Lloyds’ IT system to a new one managed by TSB’s current owner Sabadell in April.
Mr Meddings denied that Mr Pester had become the “fall guy” and said his departure was “no reflection of any individual responsibility for what has occurred”.
He stressed his move to step down had been planned for some weeks and was not related to the latest IT woes seen on Sunday and Monday.
Consumer group Which? also cheered a change at the top of TSB, hailing it an “opportunity for TSB to finally get to grips with the IT crisis that has affected millions and ensure it focuses on what really matters – providing the great service the bank’s customers deserve”.