Yesterday ex-HBOS chief Sir James Crosby, a long-time New Labour favourite, was thrust into the limelight after the Treasury Select Committee produced a memo suggesting he’d sacked his head of risk back in 2005 for suggesting the bank’s strategy was too risky. Now he’s quit his illustrious job as deputy director of the Financial Services Authority, minutes after his old chum Gordon Brown failed conspicuously to support him publicly. As the man who presided over HBOS’s explosive growth in the early part of the decade, Crosby’s day of reckoning may be long overdue – but this doesn’t look great for the Government…
The revelations from Paul Moore, HBOS’s former head of risk, were undoubtedly the most interesting thing about yesterday’s hearing (although the competition wasn’t particularly stiff, to be fair). Moore sent a memo to the committee claiming that he was fired by Crosby personally after repeatedly raising concerns about the bank’s rapid growth – to be replaced by someone with no experience of risk management. He promptly sued them for unfair dismissal, citing whistleblower protections, and in mid-2005 HBOS settled the claim by paying out ‘substantial damages’, on condition that he sign a gagging order.
As Gordon Brown pointed out at Prime Minister’s Questions today, these allegations remain unproven. However, the lukewarm response of the PM’s spokesman today to questions about whether Crosby still enjoyed the full confidence of Number 10 – ‘these are serious allegations but they are contested allegations' – really meant the writing was on the wall for Crosby. A few minutes later, he quit.
Until yesterday, Crosby had emerged from the financial ordure smelling of roses: after handing over the HBOS reins to Hornby in 2006 (a classic hospital pass, by the looks of it), his old mucker Gordon Brown appointed him to run a task force on ID cards, named him as deputy chairman of the FSA, and more recently put him in charge of a review of the mortgage market. Not to mention giving him a knighthood. This doesn’t exactly look like great judgement from the PM, with hindsight.
At least today’s news may go down well with Andy Hornby, Crosby’s successor at HBOS, who faced the wrath of MPs yesterday. Hornby did point out that he’d only been in charge of HBOS for two years, most of which had been spent reducing the bank’s risks – in other words, rectifying earlier errors. This row will provide a useful reminder that many of HBOS’s most egregious errors – notably the extraordinary over-commitment to property lending – happened before his watch. It also means the FSA needs another deputy director - and since it will be almost impossible to find a banker with clean hands, it might be worth sticking in an application.
So the crisis claims another casualty – though since Crosby’s tenure as HBOS chief gave the world those appalling ads with Howard, the singing Halifax banker, he won’t be getting any sympathy from us.
In today's bulletin:
Crosby falls on sword after HBOS whistleblower row
Unemployment up again as Bank admits 'deep recession'
Ashley makes approach for Blacks
Salad days no more for UK graduates
Editor's blog: Pontificating in Portmeirion