Yesterday Sir James Crosby stood down from the FSA after a Treasury Select Committee grilled former HBOS chiefs concerning the sacking of head of group regulatory risk Paul Moore in 2004 by Crosby after he explicitly warned the bank of an over-reliance on wholesale funding.
Moore also went to the FSA after his dismissal and said his replacement, Jo Dawson was not “fit and proper” to hold that post, by reason of lack of integrity, lack of experience in risk management, and of general attitude and approach. Dawson was a personal appointment by Crosby.
The FSA has revealed that it had found risk control failings two years before Moore’s sacking.
It says: “The FSA conducted a full risk assessment of HBOS in late 2002 which identified a need to strengthen the control infrastructure within the group. We then conducted a further full risk assessment of the HBOS group to cover all of the group’s business in December 2004, the assessment was that the risk profile of the group had improved and that the group had made good progress, but that the group risk functions still needed to enhance their ability to influence the business, which we saw as a key challenge.”
KPMG subsequently investigated Moore’s complaints, and both the auditor and the FSA says it was satisfied that Dawson was qualified for the position and that Moore’s sacking was not due to him being “excessively robust” in his work.
The FSA also investigated HBOS again in 2006. It says: “Whilst the group had made progress, there were still control issues. We made clear that we would closely track progress in this area. The growth strategy of the group posed risks to the whole group and that these risks must be managed and mitigated.”