Former HBOS chair right to stand down from FSA post says PM

Published on Wednesday 11 February 2009 12:58

Gordon Brown said today that Sir James Crosby was "right" to stand down as deputy chairman of the City regulator following allegations that he sacked a "whistleblower" who warned of the risks facing HBOS.

Speaking at Prime Minister's Questions, Mr Brown told MPs that the claims made against Sir James, relating to the period when he was HBOS chief executive, would be contested.

Bill Jamieson's Business Blog: Whistleblower letter brings down ex HBOS chief Crosby

"It is right that we investigate serious allegations that are made about the banking system. These are serious but contested allegations.

"In relation to Sir James Crosby, these are allegations that he will wish to defend so it is right that he has stepped down as vice chairman of the Financial Services Authority."

Yesterday the Commons Treasury Committee released evidence by the former HBOS head of regulatory risk, Paul Moore, who said he was dismissed by Sir James in 2005 after warning that the bank was going "too fast".

Mr Brown dodged a demand for an apology from Conservative leader David Cameron, who urged him to admit it was "a serious error of judgment on his part" to appoint Sir James to the deputy chairmanship of the FSA.

Mr Cameron told MPs in the Commons that Sir James was a man whom Mr Brown had "singled out to regulate our banks and advise our Government" on mortgages, as well as granting him a knighthood.

"Does the Prime Minister accept that it was a serious error of judgment on his part to appoint him?" asked the Tory leader.

Mr Brown responded: "The allegations that were brought before the Treasury Select Committee were investigated by the independent KPMG in 2005. The allegations made by Mr Moore were found not to be substantiated.

"That was an independent review that was done by KPMG and reported to the Financial Services Authority.

"However, it is right that when serious allegations are made, they are properly investigated.

"No doubt the Treasury Select Committee will want to look at them and no doubt the Conservative Party will want to wait to see how that investigation takes place."

Mr Brown said Sir James had conducted two inquiries for the Government – one on security issues for him when he was Chancellor and one on mortgages for current Chancellor Alistair Darling – but he was no longer a Government adviser.

And he said: "We are facing very big issues in the economy at the moment and the way the Conservative Party want to trivialise them does no merit to the Conservative Party."

But Mr Cameron replied: "There is nothing trivial about asking the Prime Minister about the man he appointed to regulate our banks."

Mr Cameron said Mr Brown's refusal to apologise was part of a wider pattern of seeking to avoid blame for Britain's economic problems.

"Why can't the Prime Minister admit he has made an error of judgment?"

asked the Tory leader.

"Isn't this a part of the Prime Minister's problem?

"Sir James Crosby has had the decency to resign. Why can't the Prime Minister have the decency to admit he got something wrong?"

Mr Brown dodged a demand for an apology from Conservative leader David Cameron, who urged him to admit it was "a serious error of judgment on his part" to appoint Sir James to the deputy chairmanship of the FSA.

Mr Cameron told MPs in the Commons that Sir James was a man whom Mr Brown had "singled out to regulate our banks and advise our Government" on mortgages, as well as granting him a knighthood.

"Does the Prime Minister accept that it was a serious error of judgment on his part to appoint him?" asked the Tory leader.

Mr Brown responded: "The allegations that were brought before the Treasury Select Committee were investigated by the independent KPMG in 2005. The allegations made by Mr Moore were found not to be substantiated.

"That was an independent review that was done by KPMG and reported to the Financial Services Authority.

"However, it is right that when serious allegations are made, they are properly investigated.

"No doubt the Treasury Select Committee will want to look at them and no doubt the Conservative Party will want to wait to see how that investigation takes place."

Mr Brown said Sir James had conducted two inquiries for the Government – one on security issues for him when he was Chancellor and one on mortgages for current Chancellor Alistair Darling – but he was no longer a Government adviser.

And he said: "We are facing very big issues in the economy at the moment and the way the Conservative Party want to trivialise them does no merit to the Conservative Party."

But Mr Cameron replied: "There is nothing trivial about asking the Prime Minister about the man he appointed to regulate our banks."

Mr Cameron said Mr Brown's refusal to apologise was part of a wider pattern of seeking to avoid blame for Britain's economic problems.

"Why can't the Prime Minister admit he has made an error of judgment?" asked the Tory leader.

"Isn't this a part of the Prime Minister's problem?

"Sir James Crosby has had the decency to resign. Why can't the Prime Minister have the decency to admit he got something wrong?"