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| Version 0 | Version 1 |
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| Watchdog's early warning for HBOS | Watchdog's early warning for HBOS |
| (about 3 hours later) | |
| The Financial Services Authority (FSA), the City watchdog, has said it raised concerns about the way HBOS was being run as far back as 2002. | The Financial Services Authority (FSA), the City watchdog, has said it raised concerns about the way HBOS was being run as far back as 2002. |
| It said it looked at the risks both before and after HBOS risk manager Paul Moore issued a warning about the the bank's business model. | |
| Mr Moore says he was sacked in 2005 for blowing the whistle. | Mr Moore says he was sacked in 2005 for blowing the whistle. |
| His claims led to Sir James Crosby, the former head of HBOS, stepping down as FSA deputy chairman on Wednesday. | His claims led to Sir James Crosby, the former head of HBOS, stepping down as FSA deputy chairman on Wednesday. |
| 'Man in charge' | |
| The Liberal Democrats' treasury spokesman Vince Cable said it was "a completely absurd decision" to appoint Sir James to the job, when the FSA had been warning about the way HBOS was being run. | |
| "The government must have known all this and yet the head of the bank that ultimately collapsed was appointed to a major role supervising the banks," he told the BBC. | |
| Shadow chancellor George Osborne said the prime minister had questions to answer. | |
| "The key question is did Gordon Brown know?" he said. | |
| "Increasingly it's difficult for him to hide the truth that he was the man in charge and he let the banking system collapse on his watch." | |
| The prime minister will face questions from the chairmen of all the House of Commons' committees later, and is expected to be asked about Sir James Crosby. | |
| 'Avoid controversy' | 'Avoid controversy' |
| Sir James, who led HBOS from 2001 to 2006, said there was "no substance to the allegations" that he sacked Mr Moore for raising concerns the bank was exposed to too much risk. | Sir James, who led HBOS from 2001 to 2006, said there was "no substance to the allegations" that he sacked Mr Moore for raising concerns the bank was exposed to too much risk. |
| But Mr Moore has said he stands "firmly and confidently" behind his allegations. | But Mr Moore has said he stands "firmly and confidently" behind his allegations. |
| The Treasury told the BBC it was Sir James's personal decision to resign from the FSA. | The Treasury told the BBC it was Sir James's personal decision to resign from the FSA. |
| The BBC's business editor Robert Peston said he understood Sir James stood down to protect the FSA from controversy. | The BBC's business editor Robert Peston said he understood Sir James stood down to protect the FSA from controversy. |
| The FSA said in the light of the allegations it was taking the unusual step of issuing a statement about its regulation of HBOS, which was bailed out with taxpayers' money last year. | |
| 'Mitigate risk' | 'Mitigate risk' |
| In the statement, the FSA stressed it first carried a full risk assessment of HBOS in 2002, which found the bank needed to strengthen control infrastructure within the group. | In the statement, the FSA stressed it first carried a full risk assessment of HBOS in 2002, which found the bank needed to strengthen control infrastructure within the group. |
| After another full risk assessment in December 2004, the FSA found progress had been made but HBOS still needed to improve its group risk functions and ability to influence the business. | After another full risk assessment in December 2004, the FSA found progress had been made but HBOS still needed to improve its group risk functions and ability to influence the business. |
| In June 2006, the FSA wrote to HBOS with a further risk assessment, making it clear there were still control issues and the "growth strategy of the group posed risks to the whole group and that these risks needed to be managed and mitigated". | In June 2006, the FSA wrote to HBOS with a further risk assessment, making it clear there were still control issues and the "growth strategy of the group posed risks to the whole group and that these risks needed to be managed and mitigated". |
| It also said it backed the findings of an inquiry conducted at the time Mr Moore made the allegations, which found his concerns were unfounded. | It also said it backed the findings of an inquiry conducted at the time Mr Moore made the allegations, which found his concerns were unfounded. |