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Banking regulator Sir James Crosby quits over claim he silenced critic
Nicholas Cecil11.02.09
A City regulator was forced to quit today over claims that he sacked a whistleblower who warned of the banking crisis.
Sir James Crosby resigned as deputy chairman of the Financial Services Authority after Downing Street refused to back him.
The former HBOS chief executive is accused of gagging his head of risk, Paul Moore, who had warned that HBOS was taking far too many risks which could plunge it into financial disaster.
Sir James, who has worked as a leading government adviser, stepped down only 24 hours after the "gagging" claims were made, quitting shortly after the Prime Minister's official spokesman stopped short of saying that Mr Brown had full confidence in him.
Tory leader David Cameron claimed that the appointment of Sir James, both to the FSA, and as one of Mr Brown's closest financial advisers, raised serious questions over the Prime Minister's judgement. Mr Brown dodged a demand from Mr Cameron for an apology.
The Tory leader also urged the Prime Minister to admit that it was "a serious error of judgment on his part" to appoint Sir James to the deputy chairmanship of the FSA.
However, at Prime Minister's Questions, Mr Brown appeared to distance himself from Sir James, stressing he no longer worked as an adviser to the Government.
Mr Brown insisted that the banking boss, who has drawn up a flagship report on mortgages for the Treasury, would defend himself against the claims made against him yesterday by Mr Moore, who worked as HBOS risk chief until 2005.
Mr Moore said in an interview with Newsnight on the BBC: "Ultimately I was sacked because I raised challenges with which Sir James was not comfortable. He said, of course, it was because I didn't fit in."
Mr Brown also made it clear that the FSA would be expected to improve as it battles to restore confidence in its ability to regulate the City.
Mr Brown backed Sir James's departure so he could fight the claims. But he added: "It is important that the FSA show at this time that it is operating to the best standards possible. The review that has been set up will look at exactly these matters, of risk management, remuneration and the performance of boards.
"I believe the system of regulation in this country can and will be improved."
Sir James's decision to go shortly before Prime Minister's Questions, sparked suggestions that he had been pushed out by Downing Street.
However, Downing Street rejected the claims that Sir James had been forced to fall on his sword.
A spokesman said: "His statement makes it very clear that it was his decision."
There were also growing questions over the FSA and in particular its board as Sir James was a non-executive director at the same time as he was head of HBOS.
The financial watchdog examined decisions made by the bank which had to be rescued by Lloyds TSB and is now part of the Lloyds Banking Group which is itself 43 per cent-owned by the taxpayer.
As revealed by the Evening Standard yesterday, Mr Moore made a bombshell written submission to the Treasury select committee yesterday which is investigating the financial crisis.
Mr Moore told the MPs that he had warned the bank that it was "going too fast", had a "cultural indisposition to challenge" and was a serious risk to "financial stability and consumer protection."
He blamed the crisis at HBOS on Sir James.
However, in his resignation letter the former banker said he was confident there was "no substance" in the allegations, but felt the "right course of action" was to resign from the FSA board.
He stressed that an independent investigation had backed up his decision to dismiss Mr Moore.
Sir James said: "HBOS has reiterated its view that his allegations have no merit.
"Whilst I am totally confident that there is no substance to any of 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."
HBOS had sought to brush off the allegations.
But the Standard also revealed today that Liberal Democrat Treasury spokesman Vince Cable felt Sir James had also tried to silence his warnings over the looming economic turmoil.
Sir James, who left HBOS in July 2006, has more than 30 years of experience in the financial industry.
He has also produced two reports for the Government on ID cards and mortgage financing but sought to quell questions over his independence today.
He said: "I am confident that anyone who either worked with me on the reports, or indeed anyone who has read them, will conclude that they are the work of someone who is genuinely independent of Government.
"In addition, I want to emphasise that I have absolutely no political connections or affiliations."
Reader views (31)
Who were the Auditors and what were they doing? It is their job to ensure that the balance sheet gives a true and fair view including the value of debts, they are also supposed to protect the interest of the shareholders. Did they qualify their report. Were they not aware of the FSA's misgivings?
- Kent, Bath
Just another plot line from "YES MINISTER". You Poms are too flaming complacent to do anything radical to sort out this mess.
- Blair Keith, Geelong, Australia
So why exactly do we call him Sir.
- Mr. S.Port, London
This guy played for high stakes - £10 million salary from the bank - and lost the game and his reputation.
Pity for him, but I suppose he does get to keep the money.
For me honour would be restored if he gave the money back.
- Nick, London
An honourable man, come off it.
He and his cohorts saw the little boy crying the "emperor has no clothes" and that their up front commissions were being questioned and decided to get rid and replace him with more yes men.
When the lid is being lifted more stink gets out. Take the lid off completely and we will really see what is rotten inside.
- Tom Fitz, Loughborough
as the waves start flooding the poop deck the rats start to leave the sinking ship that they have steered onto the reef of despair, taking to the life boat golden goodbye with a bag of ring fenced pensions to sustain them on the desert island of desperate denial.
- M.O'Brien, london.uk
What good is the FSA with people like that in charge? Why not have a clearout and start again with senior staff that are more alert and capable of protecting the public.
- Douglas, Bristol
And he was knighted for, um, what, precisely? "Services to banking"? Excuse me while I throw up over my keyboard...
- Michael Spencer, Toronto, Canada
This is waffle and we, the thinking public,are aware of it. Why are some of you commentators above congratulating him on being honourable by resigning. For goodness sake he hasn't the neck to stand up to on going bitter criticism, he has no choice bu to resign. He should never have been on both boards anyway, its a conflict of interest. Mr Moore who was utterly correct should be reinstated and publicly apologised to. I wonder what the salaries, golden handshakes, pension pot etc Sir James Crosby walks away with.
Its obvious that some people were granted loans which were too large. We know that they shouldn't have applied for them, but these idiots in charge should not have been granting them. Well done HSBC and Co-op banks for being more prudent.
- Ann, Chelmsford UK
ferchrissakes, doesn't anyone get sacked these days or are you just allowed to resign ?
- Simon Bucknell, enfield
'Congratulations' ? 'Honest Man' ? Come off it. He's been found out, telling Mr Brown what he wanted to hear and backing him in his reckless conduct of the economy. Let's hope this is the first in a string of resignations, political as well as financial.
- Peter Haldane, London
So... That investigation concluded that Mr Moore's allegations had no merit.
Sir James Crosby quite happily smeared
Paul Moore and continues to do so with impunity. Paul Moore was proved to be right and unlike Sir James Crosby will not get a handsome payoff. Indeed following this he was promoted way beyond his level of competence.
Sir James should be stripped immediately of his "Sir" and barred from any position of responsibility for the rest of his life.
Paul Moore should be given a position of responsibility at a newly reformed FSA succesor.
We should tolerate fools and reckless politicos no longer.
This is Gordon Brown's Dr David Kelly moment.
- Stephen Holmes, Swindon
A good start I suppose but I seriously doubt he had any choice but to resign. Had he not done so, Prime Minister's question Time would have been embarrassing for the Government.
Now, let us see Gordon Brown resign, after all, he was Chancellor for many years and with all his overpaid advisers, he should have seen all this coming.
- Kathy Doyle, London
These people working as CEO's etc of big banks and Financial companies have no clue,they do not hold any financial qualifications or have the necessary experience.They are gamblers gambling other people's money.The same can be said about the people in the present government.We are now paying the price.This is not a question of hindsight,but basic common sense.
- Ben, harrow
Ha Ha Ha! He STILL doesn't get it. It's not his ability at "writing reports" that's the problem. Or his "absolutely no political connections or affiliations".
However, as CEO of HBOS he "elevated" the Risk Function to report direct to himself. Then he fired Mr Moore, the Risk Manager after Mr Moore warned him that the bank was moving too fast, and exposing itself to high risk.
Then the whole club i.e. the Board of HBOS and the FSA investigated the matter and concluded these were mere "allegations", and promptly buried the report.
Mate, if you still can't make the distinction between an "allegation" and "fact" i.e. the actual collapse in the entire UK banking industry (including HBOS!) caused by unmitigated risk taking by your bank, you're either smoking bananas or unbelievably arrogant. And as we all should know: Arrogance breeds Incompetence.
It will be interesting to see at which 'jobs for the boys' position this 'honorable man' next turns up.
- Haskey, London SE1
'An honourable man' - Have I been reading a different story? This guy is a walking disaster area. There must be some sort of prosecution against such inividuals. This man is either a complete imbecile(unlikely) or he acted in complete self-interest.
- Alex C, London
Well done Sir James Crosby for doing the right thing. Let's hope that others take note.
- Sharon, London
having just read Paul Moore's full testimony to the treasury select committee, Mr Crosby will do well to avoid further charges being pressed against him.
- Scott, London
Greed, pure and simple !
Highlighting risks is always roundly applauded when it highlights the practices of one invidual or a small team, especially if its fraudulent and for personal gain but is ultimately frowned upon when the person appointed to monitor risks highlights an organisational strategy which is overly ambitious and the head honchos only see the £ signs that 'were' rolling in,
a.k.a Nic Lesson.
Will there really be much change in the future though ??? Umm ????
- Steve Brown, London, England
Forget grilling the bankers for a change, and let's put the MPs in front of the public to explain how they totally misuse and abuse taxpayers' money. I look forward to that day.
- Anon, London
How on earth was Crosby allowed to be a non executive director of FSA at the same time as he was CEO of HBOS? There is little chance of the financial system dealing with rotten companies if company leaders are allowed to concurrently sit on the board of the national regulator.
Moore's treatment was appalling by HBOS for trying to the professionally right thing in conflict with a prevailing greedy 'group think' culture which threatened him to not rock the boat and then sacked him.
- Mike, london
The wheels are finally falling off. They are leaving the sinking ship.
- John, Australia
If the claims that the bank was running into trouble "had no merit", how did the bank end up insolvent? Surely there must have been some merit in Mr Moore's claims, or HBOS would not have needed the drastic surgery it's just undergone?
- Neil M., london uk,
Congratulations. Let's make resigning an honourable thing to do again, instead of grimly hanging onto your job denying all allegations of misdeeds, as exemplified by the last 10 years of Labour government ........
- Marianne, SW France
At last an honorable man ( a non politician of course ) who knows that comments about him are clouding the issue and has therefor decided to resign. Irrespective of whether the reports of conversations with Vince Cable are correct or if the minutes of Board Meetings at HBOS show Paul Moore did give warnings. Sir James has at least done the right thing.
- Michael, London
Two years ago I made initial enquiries about a mortgage in Manchester, I was told by my mortgage adviser at Lloyds Bank to be very careful about buying property at this time. I suspected for some time that the system for mortgage lending was flawed because basic economics tells you that lending so much to people who are barely able to pay it back is fundamentally wrong. It's not rocket science. I eventually chose not to buy because I was convinced that the market was over priced again look at what you are buying and determine whether its worth the money, the simple answer for me was no. I am staggered by the banks practices and the fact that Gordon Brown states that he didnt see this coming is beyond comprehension because I did and so did the mortgage adviser at Lloyds and we have not been employed to run the country. Brown must not be allowed to carry on as Prine Minister, I hope even the staunchest Labour voter will turn their backs on the party at the next election because Labours incompetence is beyond belief!
- Stuart, UK
He really had no choice but to resign.However will this man be forced to appear in front of the Treasury Select Committee? Reminds me of a certain Hans Christian Anderson tale of the king with no clothes.What is the point of having a "risk" committee if you just ignore it and then sack the messenger.
- Jim, London
The FSA are surely a joke. Over the years they haven't actually regulated anything. They should sack the lot of them and start again.
- Jethro Payne, Streatham Common
At long last the story behind the economic crisis is beginning to emerge. There is a long way to go before all the facts are known but the events yesterday at the Treasury Select committee hearing are a good start!
The taxpayers and electorate are mature individuals, they are not looking for a "name, blame and shame" scenario, but they do feel entitled to be told what really happened, why their money is needed to bail out the banks, and how the current situation can be best handled.
- Manny Goldstein, London, UK
"I realised that the bank was moving too fast and I raised those challenges very strongly ..."
And he should have been drowned out by city analysts and institutional shareholders all saying the same thing. Instead they were swallowing the banks' PR and taking handsome fees for 'investing' our money in said banks.
- Tonyb, Melbourne, Australia
The banks, the regulator and the Government ignored warnings of other well-respected people such as the late Sir John Templeton who expressed his concern about the housing market in an interview in July 2003. Who in their right mind would appoint a 42 year old non-banker to be Chief Executive of HBOS?
- Nick Cotton, West Sussex
