Abbey National chairman comes to the defence of embattled chief executive

Lord Burns, Abbey National's chairman, is set to resist calls for the sacking of the mortgage bank's embattled chief executive, Ian Harley, following last week's profits warning.

The former Treasury mandarin, who took over the chairmanship of Abbey just before Christmas, is thought to believe that Mr Harley's removal would only destabilise the bank further at a time when it is facing challenges on other fronts.

His backing for Mr Harley came as the former head of Abbey National's troubled wholesale banking division, Gareth Jones, launched an extraordinary public attack on the bank's management.

In an open letter to Lord Burns, Mr Jones said that when he quit Abbey in October, he left behind "an extremely healthy business" and that the "marked deterioration" in the company had only taken place since his departure.

Mr Jones also claims that he warned Mark Pain, Abbey's managing director, to take out credit protection against some doubtful loans but his advice was ignored. Abbey warned last week that bad debt provisions this year are likely to be in the region of £450m, even though Mr Harley reassured investors when Mr Jones left eight months ago that there were no "black holes" in the business.

In his letter Mr Jones claims that from 1997 onwards he voiced his worries about Abbey's wholesale banking arm coming under pressure from the group's move into private equity and high-yield debt but his concerns were ignored.

He also discloses that last June, while Abbey was fighting off a hostile takeover bid from Lloyds TSB, the management under Mr Harley endorsed a report from the consultants McKinsey stating that Abbey could become "one of the world's top five banks" by 2005.

Mr Jones said this ambitious strategy would have required his division to increase profits to £1.5bn. "I was adamantly opposed to this report and its findings from the outset and made my opposition clear. I argued that we could only achieve those increased profits by substantially increasing our risk. Nevertheless, those plans were endorsed and approved at the conclusion of the conference."

Mr Jones said he had decided to release his letter because of criticisms that had been made of him in the press and asked Lord Burns for an assurance that no Abbey executives or their professionals were briefing against him to the media.

An Abbey spokeswoman said the bank was "surprised" by the letter and "strongly" rejected Mr Jones's allegations. She said the bank particularly denied the suggestion that any of its executives had "pointed the finger of blame" at Mr Jones.

Abbey also described as "speculative and premature" weekend reports that Lord Burns was preparing to appoint headhunters within the next fortnight to find a replacement for Mr Harley. Gordon Pell, Royal Bank of Scotland's head of retail banking, and Adam Applegarth, chief executive of Northern Rock, were named as potential successors.

Lord Burns is said not to recognise the reports. He is also thought to believe that calls from some shareholders for Mr Harley's head represent a "minority" view among Abbey's big institutional investors and that there are more urgent priorities to deal with such as the collapse in equity values, the overheating mortgage market and impending reviews of the UK savings industry.

Abbey has now seen most of its big shareholders. Mr Harley, who admitted at the weekend to "getting a worse press than Osama bin Laden", is to meet the remaining big institutions this week while Abbey's finance director, Stephen Hester, is due to brief analysts.