Crosby resigns from FSA following risk claims

FORMER HBOS chief executive Sir James Crosby has resigned from his role with the Financial Services Authority.

His resignation as deputy chairman of the financial watchdog follows claims that he sacked an executive who warned about excessive risk taking by HBOS during Sir James’ time at the helm.

Sir James has since become a key adviser to Prime Minister Gordon Brown and Tory Shadow Chancellor George Osborne has called for an investigation into claims that HBOS executive Paul Moore was sacked in 2005 after he warned the bank’s board about its potentially dangerous “sales culture”.

Sir James, who lives in Harrogate, was HBOS’ chief executive from 2001 to 2006 and later became deputy head of the Financial Services Authority.

He has said there is “no substance to the allegations”.

“I nonetheless feel that the right course of action for the FSA is for me to resign from the FSA board, which I do with immediate effect,” he added.

Sir James said in his statement that HBOS had “extensively investigated” Mr Moore’s allegations, concluding that they “had no merit”.

In addition to his role at the FSA, Sir James is also an adviser to the Treasury.

Mr Moore, who was head of group regulatory risk at HBOS, has told the BBC there was evidence of “negligence”, questions of “breach of principles” and even “recklessness” at the bank.

The Tories say the claims could call Mr Brown’s judgement into question.

Mr Moore said: “I realised the bank was moving too fast and I raised those challenges very strongly at board level. I also raised issues of cultural indisposition to challenge and inappropriate behaviours, and ultimately I was sacked.”

Earlier, in written evidence to the Treasury select committee – who yesterday questioned former bank chiefs including Sir James’ successor at HBOS Andy Hornby – Mr Moore said the crisis which drove HBOS to the brink of collapse could have been avoided if there had been adequate systems to hold bank chiefs in check.

He said: “I told the board they ought to slow down but was prevented from having this properly minuted by the chief financial officer.

“I told them that their sales culture was significantly out of balance with their systems and controls.”

Mr Moore said that, after suing for unfair dismissal, he received “substantial damages” but was subjected to a “gagging order” preventing him from speaking out.

He had decided to talk publicly about the issue now because, he said, “the public interest demands it”.

Mr Moore’s account of his warnings and his alleged treatment by Sir James was disclosed in an evidence session of the Treasury committee, at which figures including former HBOS chairman Lord Stevenson apologised for bringing their banks to the verge of collapse.

Lord Stevenson said Mr Moore’s claims had been rejected after a nine-month inquiry by the Financial Services Authority.

He also denied Mr Moore’s claim that he had been prevented from putting his views on the record by having them included in the minutes of a board meeting.

Mr Hornby also rejected Mr Moore’s claim that he was met with “threatening behaviour” from some executives when he tried to raise concerns.

In his written evidence to the committee, Mr Moore said the HBOS story was like the “Emperor’s new clothes” with no one prepared to “step out of line” and say what was going wrong.

Shadow chancellor George Osborne said: “What we don’t know is whether Mr Moore’s allegations that his warnings went ignored by Sir James Crosby are true or not.

“And I think the Government need to now investigate these allegations. They are exceptionally serious.”

He also said: “Given that, as chancellor, Gordon Brown appointed Sir James as deputy chairman of the FSA and that as prime minister he relies upon him as a key economic adviser, the government need urgently to investigate the allegations and discover the truth.

“What is at issue here is Gordon Brown’s judgement and the people he takes advice from.”