FSA deputy chairman resigns over HBOS risk whistleblower

The UK's number two regulator has stepped down over a risk management scandal

LONDON - Deputy chairman of the Financial Services Authority (FSA) Sir James Crosby, formerly chief executive of HBOS, has resigned from the UK regulator after accusations he ignored warnings of excessive risk-taking in the bank in 2004.

Crosby's resignation is a political blow for embattled UK prime minister Gordon Brown, for whom Crosby had been acting as an economic adviser. In 2005, Crosby dismissed HBOS's then head of group regulatory risk, Paul Moore.

Moore alleges he was pushed out after suggesting HBOS was pursuing a risky business strategy by "going too fast", with aggressive sales and lending, representing "a serious risk to financial stability and consumer protection".

Moore's dismissal was assessed in an April 2005 report, commissioned by the FSA and carried out by accountancy firm KPMG, which concluded: "We have no evidence to suggest that Moore's redundancy was in response to him performing his job too well (as he suggests)."

Moore has also claimed his successor at HBOS, Jo Dawson, was hired with insufficient experience. However, the KPMG report cleared HBOS from blame in its appointment, which it found was "appropriate", noting that an external recruitment firm had been used.

The KPMG report concluded Moore had departed from HBOS as a result of personal differences at a high level within the bank.