Crosby resigns as deputy-head of FSA

By staff

Sir James Crosby has resigned from his position as deputy-chair of the Financial Services Authority (FSA) in the wake of allegations by bankers in front of the Treasury committee yesterday.

In written evidence given to the committee yesterday, former head of regulatory risk at HBOS Paul Moore claimed the then-chief executive, Sir James Crosby, was the “original architect” of the bank’s doomed expansion policy.

The allegation Sir James forced Mr Moore out of his position arose when MPs quizzed the former chairman and chief executive of HBOS.

Sir James stated the allegations were groundless.

“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,” he said in a statement.

Sir James was appointed deputy chairman of the FSA by Gordon Brown when he was chancellor, and Mr Moore suggested the FSA did not look into his complaints because of Sir James’ position in the organisation.

David Cameron seized on the controversy during today’s prime minister’s questions, asking Mr Brown if appointing him was an error of judgement.

Mr Brown said Sir James only produced two reports and “is no longer an economic advisor to the government and has only been so in the context of producing two reports”.

Liberal Democrat economics spokesman Vince Cable said: “It is clear from Paul Moore’s evidence that James Crosby was part of the problem, not part of the solution. The FSA needs people with experience, but not the wrong experience.

“It is extraordinary that Gordon Brown ever made such an utterly inappropriate appointment.”

In written evidence to the committee, Mr Moore said: “It is now clear that this disastrous ‘grow assets at all costs’ strategy was what led to HBOS’s downfall and humiliating demise by the forced acquisition by Lloyds.”

He claimed both he and his team were subject to “threatening behaviours by executives” when they were trying to ensure compliance with FSA regulations.

“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,” he said.

“Anyone whose eyes were not blinded by money, power and pride could have seen the explosion of ‘excessively easy credit’ was leading to disaster.

“But, sadly, no one wanted or felt able to speak up for fear of stepping out of line with the rest of the lemmings who were busy organising themselves to run over the edge of the cliff behind the pied piper CEOs and executive teams that were being paid so much to play that tune.”

In a statement released today, Sir James said: “I did ask one of our risk managers to leave HBOS. At the time he made a series of allegations.” He went on to say that an investigation in to the allegations “concluded they had no merit”.

A government statement stressed there had been no meetings between Sir James and ministers in the last 24 hours, indicating the decision was entirely personal.

Sir James was knighted in 2006 for his contribution to financial services, which Mr Moore queried in his nine-page statement to the committee.

“Some might now also question what his ‘contribution to financial services’ has in fact been when this will have led to millions of people in excessive debt, thousands who will lose their jobs and many more whose balance sheets have been impacted by the precipitous fall of the HBOS share price – apart from the reduction in competition in the retail financial services market threatened by the new Lloyds Group.”

There are now calls from the Conservatives for an urgent inquiry into the claims made by Mr Moore.