FSA is set to investigate former chief over HBOS supervision

Crosby also 'headed bank for some of relevant period' ahead of near collapse

The City watchdog is to investigate whether its former deputy chairman Sir James Crosby had an "undue influence" on its oversight of HBOS in the run-up to the bank's near collapse, it emerged last night.

Sir James joined the board of the Financial Services Authority in January 2004, and became deputy chairman there in 2007, having been appointed by Gordon Brown when he was Chancellor of the Exchequer. Mr Brown has previously told the Treasury Select Committee that he took "full responsibility" for the appointment.

Sir James was still chief executive of HBOS at the time he joined the watchdog's board and did not step down from the bank until 2006 when he was replaced Andy Hornby, the former retailer who was in charge of the bank when it had to be rescued by Lloyds Banking Group in a deal brokered by Mr Brown's government.

Summary minutes of the watchdog's September meeting reveal that directors discussed the fact that Sir James, "the previous deputy chair of the FSA" had been "CEO of HBOS for part of the relevant period" and that the report "needed to address any perceived influence of his position on the FSA's supervision of HBOS".

Sir James's role at the FSA became hugely controversial after allegations that he had sacked HBOS's former head of risk Paul Moore, who in 2003 and 2004 argued that the bank was exposed to too much risk.

Mr Moore's arguments centred on concerns about borrowers' ability to repay loans rather than wholesale lending markets shutting down, which left the bank fatally exposed and led to its rescue by Lloyds. Mr Moore's dossier of complaints was originally investigated by KPMG, the City accountancy firm and former HBOS auditor, which concluded that HBOS did in fact have appropriate risk controls in place at the time. This was originally accepted by the Financial Services Authority.

Sir James resigned from his role at the FSA to protect it from mounting criticism after the news that Mr Moore had raised concerns about the bank's risk profile broke.

Were the report to find that Sir James had exerted any influence over the supervision of HBOS it could ignite a powder keg and draw Mr Brown in, although there is no suggestion that this is the case.

The analysis of the FSA's conduct will be carried out by Grant Thornton after all the "big four" accounts, which include PricewaterhouseCoopers, Deloitte and Ernst & Young in addition to KPMG declined the work citing conflicts of interest.

Board members also discussed the fact that the report will likely prove to be more expensive than a similar probe into the collapse of Royal Bank of Scotland. Costs will be met by Lloyds Banking Group as HBOS's owner.

The report is not expected to see the light of day until next summer. It was commissioned after Peter Cummings, who led the bank's commercial lending arm, was fined £500,000 and banned from the City, bringing to an end the only disciplinary action to result from the bank's failure.

The Parliamentary Inquiry into Banking Standards has also been considering HBOS's near collapse.

PROMOTED VIDEO
Arts and Entertainment
AKB48 perform during one of their daily concerts at Tokyo’s Akihabara theatre
musicJapan's AKB48 are one of the world’s most-successful pop acts
News
Ian Thorpe has thanked his supporters after the athlete said in an interview that he is gay
people
News
The headstone of jazz great Miles Davis at Woodlawn Cemetery in New York
news
Arts and Entertainment
Brendan O'Carroll has brought out his female alter-ego Agnes Brown for Mrs Brown's Boys D'Movie
filmComedy holds its place at top of the UK box office
News
newsBear sweltering in zoo that reaches temperatures of 40 degrees
Arts and Entertainment
Professor Kathy Willis will showcase plants from the Royal Botanic Gardens at Kew
radioPlants: From Roots to Riches has been two years in the making
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
TV The follow-up documentary that has got locals worried
Arts and Entertainment
Eminem's daughter Hailie has graduated from high school
music
Arts and Entertainment
Original Netflix series such as Orange Is The New Black are to benefit from a 'substantial' increase in investment
TVHoax announcement had caused outrage
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

News
One Direction star Harry Styles who says he has no plans to follow his pal Cara Delevingne down the catwalk.
peopleManagement confirms rumours singer is going it alone are false
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Information Security Manager (ISO 27001, Accreditation, ITIL)

£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Day In a Page

Super Mario crushes the Messi dream as Germany win the 2014 World Cup in Brazil

Super Mario crushes the Messi dream

Germany win the 2014 World Cup in Brazil
Saharan remains may be evidence of the first race war, 13,000 years ago

The first race war, 13,000 years ago?

Saharan remains may be evidence of oldest large-scale armed conflict
Scientists find early warning system for Alzheimer’s

Scientists find early warning system for Alzheimer’s

Researchers hope eye tests can spot ‘biomarkers’ of the disease
Sex, controversy and schoolgirl schtick

Meet Japan's AKB48

Pop, sex and schoolgirl schtick make for controversial success
Iraq crisis: How Saudi Arabia helped Isis take over the north of the country

How Saudi Arabia helped Isis take over northern Iraq

A speech by an ex-MI6 boss hints at a plan going back over a decade. In some areas, being Shia is akin to being a Jew in Nazi Germany, says Patrick Cockburn
The evolution of Andy Serkis: First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes

The evolution of Andy Serkis

First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes
You thought 'Benefits Street' was controversial: Follow-up documentary 'Immigrant Street' has got locals worried

You thought 'Benefits Street' was controversial...

Follow-up documentary 'Immigrant Street' has got locals worried
Refugee children from Central America let down by Washington's high ideals

Refugee children let down by Washington's high ideals

Democrats and Republicans refuse to set aside their differences to cope with the influx of desperate Central Americas, says Rupert Cornwell
Children's books are too white, says Laureate

Children's books are too white, says Laureate

Malorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
Blackest is the new black: Scientists have developed a material so dark that you can't see it...

Blackest is the new black

Scientists have developed a material so dark that you can't see it...
Matthew Barzun: America's diplomatic dude

Matthew Barzun: America's diplomatic dude

The US Ambassador to London holds 'jeans and beer' gigs at his official residence – it's all part of the job, he tells Chris Green
Meet the Quantified Selfers: From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor

Meet the 'Quantified Selfers'

From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
Madani Younis: Five-star reviews are just the opening act for British theatre's first non-white artistic director

Five-star reviews are just the opening act for British theatre's first non-white artistic director

Madani Younis wants the neighbourhood to follow his work as closely as his audiences do
Mrs Brown and her boys: are they having a laugh?

Mrs Brown and her boys: are they having a laugh?

When it comes to national stereotyping, the Irish – among others – know it can pay to play up to outsiders' expectations, says DJ Taylor