The collapsing US sub-prime mortgage market has claimed another high profile scalp after Bear Stearns ousted Warren Spector, the investment bank's co-presdent and joint chief operating officer, following an emergency board meeting at the weekend. Mr Spector was seen as a potential heir apparent to run the entire firm.

His immediate departure, announced by Bear Stearns yesterday, follows a drubbing by Standard & Poor's (S&P) late last week when the rating agency changed its outlook on the company, stating that the bank's profits could be impacted by its exposure to the American sub-prime mortgage market, which grants home loans to people with a poor credit history.

In response, Bear Stearns said that it was "disappointed" with S&P's decision, adding: "Most of the themes highlighted in its report are common to the industry and are not likely to have a disproportional impact on Bear Stearns."

Mr Spector also oversaw bond and stock trading at the American bank that sparked panic on Wall Street in June when it revealed it was forced to pump $1.6 billion into a fund invested in sub-prime mortgages securities. It subsequently emerged that both this fund and another are now virtually worthless.

Bear Stearns has appointed Mr Spector's co-president, Alan Schwartz, as sole president and the bank's chief financial officer, Samuel Molinaro, is adding the role of chief operating officer to his remit.

James Cayne, the chairman and chief executive at Bear Stearns, who Mr Spector was widely tipped to succeed, said: "In light of the recent events concerning BSAM's [Bear Stearns Asset Management] high grade and enhanced leveraged funds, we have determined to make changes in our management structure."

He added: "I have every confidence in this team to continue with Bear Stearns' 84-year legacy of success and profitable growth. Finally, I want to thank Warren Spector for his significant contributions to Bear Stearns."

In February, HSBC ousted two of its most senior executives in America after a disastrous foray into the US sub-prime mortgage market forced the bank to issue its first profit warning in its 142-year history.

Bobby Mehta, the chief executive of HSBC North American, and Sandy Derickson, the chief executive of HSBC Bank USA, walked away from the company with $40 million in performance related bonuses.

The Federal Reserve is due to meet tomorrow, to make a decision on the country's interest rate and the state of the economy in light of the sub-prime lending debacle.

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