Brown adviser quits FSA over HBOS row
Updated on 11 February 2009
A key Treasury adviser has resigned his role at the FSA over claims he knew HBOS was in trouble when he was chief executive at the bank.
Sir James Crosby, who was Halifax Bank of Scotland boss from 2001 to 2006, and who has now quit as deputy chairman of the Financial Services Authority, allegedly fired a whistleblower who had warned the bank was in trouble.
Paul Moore, who was a senior risk officer at the bank, raised concerns about HBOS's rapid growth but said his warnings were ignored by senior bosses. He was eventually let go but later won an unfair dismissal case against the bank.
Sir James - who was appointed by Mr Brown to the FSA in 2004 and was last year asked to help advise the Government on the current economic crisis - said he was confident there was "no substance" in the allegations, but felt the "right course of action" was to resign.
Mr Moore has since said he stood "firmly and confidently" behind his allegations against Sir James.
During a clash with Tory leader David Cameron in the Commons, Mr Brown told MPs that it was "right" that Sir James had stepped down, adding that they were "serious but contested allegations" that Sir James would want to defend.
But Mr Cameron called on the Prime Minister to accept that he had made a "serious error of judgment" in using Sir James as an adviser.
Mr Brown said the allegations against Sir James had been independently investigated in 2005 and found "not to be substantiated". He added: "However it is right that when serious allegations are made they are properly investigated."
Mr Cameron insisted the probe was carried out before the bank "went bust", and asked whether Sir James had now been dropped as an advisor.
Mr Brown said Sir James had carried out two reports for the Government but was not now an economic advisor, and accused Mr Cameron of focusing on trivial issues rather than wider economic problems.
In written evidence presented to the Treasury Select Committee on Tuesday, Mr Moore said: "Being an internal risk and compliance manager at the time felt a bit like being a man in a rowing boat trying to slow down an oil tanker.
"I certainly knew that the bank was going too fast, had a cultural indisposition to challenge and was a serious risk to financial stability and consumer protection. I told the board they ought to slow down."
Mr Moore said later that he stood "firmly and confidently" behind the allegations against Sir James, adding: "Ultimately I was removed and dismissed, I believe because I raised challenges with which he was not comfortable. He said, of course, that it was because I didn't fit in."
Last month, HBOS was taken over by Lloyds Banking Group in a Government-brokered rescue deal which saw £17 billion injected into the bank after its share price was hammered by a loss of confidence in its ability to survive the credit crisis due to its reliance on wholesale funding.
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