FSA responds to HBOS whistleblower scandal

FSA responds to HBOS whistleblower scandal


It’s been an extraordinary couple of days in the banking world. The heads of RBS and HBOS were mauled live on television by the Treasury select committee, whilst allegations surfacing about Sir James Crosby led him to resign as deputy chairman of the FSA. 

There are many revelations that have emerged from the showdown between MPs and bailed out bankers on Tuesday, but perhaps the most prominent was that an HBOS senior employee warned the bank back in 2005 that its risky sales culture would “lead to disaster” and was promptly fired by then chief executive, Sir James Crosby – who has been the man advising Gordon Brown, the Treasury and the FSA on risk management, ironically enough.


Sir James Crosby resigned from his post of deputy chairman at the FSA yesterday morning, although he claims that the allegations made against him by former HBOS employee, Paul Moore, do not have substance.


Mr Moore said in a written statement earlier in the week that fundamental problems within the bank, including ignoring checks and balances, were clear to “anyone whose eyes were not blinded by money, power and pride.” He also said that “people were too afraid to speak up and the balance of power was far too weighed in favour of the executive.”


Now the FSA has released a report saying that they knew HBOS needed to strengthen risk management before Mr Moore did. The City watchdog stated: “The FSA’s concerns about HBOS’ risk management framework considerably pre-dated the allegations by Mr Moore.”


The regulator went on to say: “We made clear that whilst the group had made progress there were still control issues.”


Well this news should come as a relief for all those concerned that the FSA has been “asleep at the wheel.” It turns out that they knew all along that this reckless lending could lead to what is now being described as the most serious recession in decades – they just failed to do much about it.

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