James Crosby (FSA)
Encyclopedia
Sir James Robert Crosby was Deputy Chairman of the Financial Services Authority
from January 2004 until he resigned on 11 February 2009. He had previously been the chief executive of Halifax Bank until its merger with Bank of Scotland
to form HBOS
, of which he was Chief Executive until 2006.
between 1967 and 1974. After leaving the school, he continued his studies in mathematics at Brasenose College, Oxford
.
) in 1976 and then joined J Rothschild Assurance
in 1977. After qualifying as a Fellow of the Faculty of Actuaries
in 1980, he was part of the management team which founded wealth management firm St. James's Place
plc in 1991, from floating out a majority of J Rothschild Assurance.
Group after overseeing the merger between Halifax plc and the Bank of Scotland
. In early 2006 Crosby resigned after seven years as chief executive leaving HBOS as the fourth largest bank in the United Kingdom
in terms of market capitalisation. His position was taken by "his young protégé" Andy Hornby
in July 2006.
as a non-Executive Director of the Financial Services Authority
. In November 2007 he became Deputy Chair of the FSA, and in February 2009 he resigned this role.
During a session of the Treasury Select Committee of the House of Commons on 10 February 2009, it was alleged that Sir James had ignored warnings by its former head of Group Regulatory Risk
, Paul Moore
, relating to risky business practices. Moore had predicted that HBOS's rapid growth left it vulnerable to a large number of borrower default
s. In 2005 the whistleblower
Moore was sacked by Crosby, with Moore quoted as saying that Crosby wrote "The decision (to sack Moore) was mine and mine alone." He relates the key issues in his statement:
On 11 February 2009 Crosby resigned from his post at the Financial Services Authority, which BBC
News Business Editor Robert Peston
says he understood was to protect the FSA from controversy. However, he still currently retains his job at the Treasury, although the British Prime Minister told the House of Commons at Prime Minister's Questions on 11 February 2009 that this is not the case. The FSA released a statement late on 11 February 2009 that it had concerns about HBOS before the Moore resignation, a statement which raises yet more questions about the regulation of HBOS. A central problem concerns conflict of interest
s between board members of the FSA and the companies it is trying to regulate. However, Moore has received support from a former member of his team at HBOS, Anthony Smith, who on 17 February 2009, accused HBOS of "dumbing down".
Crosby was further criticised when, following the takeover of HBOS by Lloyds, HBOS was responsible for annual losses of £10 billion, in part due to write-downs made because Lloyds' accounting standards are much more conservative than those of HBOS. Conservative Shadow Chancellor George Osborne said that the government's bank bailout money had been wiped out by the HBOS losses, saying that "HBOS bankers like James Crosby bear a heavy responsibility".
, Gordon Brown
, to lead the Government's Public Private Forum on Identity Management, a scheme designed to counter problems such as identity fraud
. Also in 2006, Crosby received a knighthood
for services to the financial industry.
In April 2008, Crosby was appointed by Chancellor
Alastair Darling to head up a Working Group of mortgage industry experts to advise the Government on how to improve the functioning of the mortgage
market.
, and a trustee of charity Cancer Research UK
.
In January 2009, it was reported that James Crosby will become the Chairman of Misys
.
Financial Services Authority
The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...
from January 2004 until he resigned on 11 February 2009. He had previously been the chief executive of Halifax Bank until its merger with Bank of Scotland
Bank of Scotland
The Bank of Scotland plc is a commercial and clearing bank based in Edinburgh, Scotland. With a history dating to the 17th century, it is the second oldest surviving bank in what is now the United Kingdom, and is the only commercial institution created by the Parliament of Scotland to...
to form HBOS
HBOS
HBOS plc is a banking and insurance company in the United Kingdom, a wholly owned subsidiary of the Lloyds Banking Group having been taken over in January 2009...
, of which he was Chief Executive until 2006.
Early life
James Crosby was educated at the Lancaster Royal Grammar SchoolLancaster Royal Grammar School
Lancaster Royal Grammar School is a voluntary aided, selective grammar school for boys in Lancaster, England. The school has been awarded specialist Technology College and Language College status. Old boys belong to The Old Lancastrians...
between 1967 and 1974. After leaving the school, he continued his studies in mathematics at Brasenose College, Oxford
Brasenose College, Oxford
Brasenose College, originally Brazen Nose College , is one of the constituent colleges of the University of Oxford in the United Kingdom. As of 2006, it has an estimated financial endowment of £98m...
.
Early career
Crosby joined financial services company Scottish Amicable (acquired in 1997 by Prudential plcPrudential plc
Prudential plc is a multinational financial services company headquartered in London, United Kingdom.Prudential's largest division is Prudential Corporation Asia, which has over 15 million customers across 13 Asian markets and is a top-three provider of life insurance in mainland China, Hong...
) in 1976 and then joined J Rothschild Assurance
Rothschild family
The Rothschild family , known as The House of Rothschild, or more simply as the Rothschilds, is a Jewish-German family that established European banking and finance houses starting in the late 18th century...
in 1977. After qualifying as a Fellow of the Faculty of Actuaries
Faculty of Actuaries
The Faculty of Actuaries in Scotland was the professional body representing actuaries in Scotland. The Faculty of Actuaries was one of two actuarial bodies in the UK, the other was the Institute of Actuaries, which was a separate body in England, Wales and Northern Ireland...
in 1980, he was part of the management team which founded wealth management firm St. James's Place
St. James's Place
St. James's Place plc is a UK-based wealth management business. It is headquartered in Cirencester and has 20 regional offices throughout the UK. It was listed on the London Stock Exchange in 1997 and is now a FTSE 250 company.-History:...
plc in 1991, from floating out a majority of J Rothschild Assurance.
HBoS
Crosby joined the Halifax bank in 1994 as Managing Director of Halifax Life. Five years later, he became the chief executive of Halifax plc, and in 2001 Crosby became the first chief executive of the newly formed HBOSHBOS
HBOS plc is a banking and insurance company in the United Kingdom, a wholly owned subsidiary of the Lloyds Banking Group having been taken over in January 2009...
Group after overseeing the merger between Halifax plc and the Bank of Scotland
Bank of Scotland
The Bank of Scotland plc is a commercial and clearing bank based in Edinburgh, Scotland. With a history dating to the 17th century, it is the second oldest surviving bank in what is now the United Kingdom, and is the only commercial institution created by the Parliament of Scotland to...
. In early 2006 Crosby resigned after seven years as chief executive leaving HBOS as the fourth largest bank in the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
in terms of market capitalisation. His position was taken by "his young protégé" Andy Hornby
Andy Hornby
Andy Hornby is an English businessman, notable for having been the Group Chief Executive of HBOS at the time of its government-facilitated rescue by Lloyds TSB...
in July 2006.
Financial Services Authority
In January 2004 Crosby was appointed by HM TreasuryHM Treasury
HM Treasury, in full Her Majesty's Treasury, informally The Treasury, is the United Kingdom government department responsible for developing and executing the British government's public finance policy and economic policy...
as a non-Executive Director of the Financial Services Authority
Financial Services Authority
The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...
. In November 2007 he became Deputy Chair of the FSA, and in February 2009 he resigned this role.
During a session of the Treasury Select Committee of the House of Commons on 10 February 2009, it was alleged that Sir James had ignored warnings by its former head of Group Regulatory Risk
Financial risk management
Financial risk management is the practice of creating economic value in a firm by using financial instruments to manage exposure to risk, particularly credit risk and market risk. Other types include Foreign exchange, Shape, Volatility, Sector, Liquidity, Inflation risks, etc...
, Paul Moore
Paul Moore (banking manager)
Paul Moore is a former manager at the bank HBOS, who came to public attention in late 2008 as a whistleblower after claiming that he had been fired for warning HBOS about its excessive risk-taking.-Biography:...
, relating to risky business practices. Moore had predicted that HBOS's rapid growth left it vulnerable to a large number of borrower default
Default (finance)
In finance, default occurs when a debtor has not met his or her legal obligations according to the debt contract, e.g. has not made a scheduled payment, or has violated a loan covenant of the debt contract. A default is the failure to pay back a loan. Default may occur if the debtor is either...
s. In 2005 the whistleblower
Whistleblower
A whistleblower is a person who tells the public or someone in authority about alleged dishonest or illegal activities occurring in a government department, a public or private organization, or a company...
Moore was sacked by Crosby, with Moore quoted as saying that Crosby wrote "The decision (to sack Moore) was mine and mine alone." He relates the key issues in his statement:
-
- 2.12 When I was Head of Group Regulatory Risk at HBOS, I certainly knew that the bank was going too fast (and told them), had a cultural indisposition to challenge (and told them) and was a serious risk to financial stability (what the FSA call "Maintaining Market Confidence") and consumer protectionConsumer protectionConsumer protection laws designed to ensure fair trade competition and the free flow of truthful information in the marketplace. The laws are designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors and may provide additional...
(and told them).
- 2.12 When I was Head of Group Regulatory Risk at HBOS, I certainly knew that the bank was going too fast (and told them), had a cultural indisposition to challenge (and told them) and was a serious risk to financial stability (what the FSA call "Maintaining Market Confidence") and consumer protection
-
- 2.13 I told the Board they ought to slow down but was prevented from having this properly minuted by the CFO. I told them that their sales culture was significantly out of balance with their systems and controls.
-
- 2.14 I was told by the FSA, the Chairman of the Audit Committee and others that I was doing a good job.
-
- 2.15 Notwithstanding this I was dismissed by the CEO (he wrote that it was "...his decision and his alone"). I sued HBOS for unfair dismissal under the whistle blowing legislation. Ironically, I was also the "Good Practice Manager" for whistle blowing purposes at HBOS but could hardly report my case to myself!
On 11 February 2009 Crosby resigned from his post at the Financial Services Authority, which BBC
BBC
The British Broadcasting Corporation is a British public service broadcaster. Its headquarters is at Broadcasting House in the City of Westminster, London. It is the largest broadcaster in the world, with about 23,000 staff...
News Business Editor Robert Peston
Robert Peston
Robert Peston is a British journalist. Since February 2006, he has been the Business Editor for BBC News. He became known to a wider public with his reporting of the late-2000s financial crisis, especially with his scoop on the Northern Rock crisis.-Early life and education:Peston is the son of...
says he understood was to protect the FSA from controversy. However, he still currently retains his job at the Treasury, although the British Prime Minister told the House of Commons at Prime Minister's Questions on 11 February 2009 that this is not the case. The FSA released a statement late on 11 February 2009 that it had concerns about HBOS before the Moore resignation, a statement which raises yet more questions about the regulation of HBOS. A central problem concerns conflict of interest
Conflict of interest
A conflict of interest occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other....
s between board members of the FSA and the companies it is trying to regulate. However, Moore has received support from a former member of his team at HBOS, Anthony Smith, who on 17 February 2009, accused HBOS of "dumbing down".
Crosby was further criticised when, following the takeover of HBOS by Lloyds, HBOS was responsible for annual losses of £10 billion, in part due to write-downs made because Lloyds' accounting standards are much more conservative than those of HBOS. Conservative Shadow Chancellor George Osborne said that the government's bank bailout money had been wiped out by the HBOS losses, saying that "HBOS bankers like James Crosby bear a heavy responsibility".
Links with HM Treasury
On 11 July 2006, Crosby was appointed by the then Chancellor of the ExchequerChancellor of the Exchequer
The Chancellor of the Exchequer is the title held by the British Cabinet minister who is responsible for all economic and financial matters. Often simply called the Chancellor, the office-holder controls HM Treasury and plays a role akin to the posts of Minister of Finance or Secretary of the...
, Gordon Brown
Gordon Brown
James Gordon Brown is a British Labour Party politician who was the Prime Minister of the United Kingdom and Leader of the Labour Party from 2007 until 2010. He previously served as Chancellor of the Exchequer in the Labour Government from 1997 to 2007...
, to lead the Government's Public Private Forum on Identity Management, a scheme designed to counter problems such as identity fraud
Identity fraud
Identity fraud may occur when someone steals personal information, opens credit card accounts in the victim's name without permission, and charges merchandise to those accounts. Conversely, identity fraud does not occur when a credit card is simply stolen. Stealing one’s credit card may be consumer...
. Also in 2006, Crosby received a knighthood
Knight Bachelor
The rank of Knight Bachelor is a part of the British honours system. It is the most basic rank of a man who has been knighted by the monarch but not as a member of one of the organised Orders of Chivalry...
for services to the financial industry.
In April 2008, Crosby was appointed by Chancellor
Chancellor
Chancellor is the title of various official positions in the governments of many nations. The original chancellors were the Cancellarii of Roman courts of justice—ushers who sat at the cancelli or lattice work screens of a basilica or law court, which separated the judge and counsel from the...
Alastair Darling to head up a Working Group of mortgage industry experts to advise the Government on how to improve the functioning of the mortgage
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
market.
Other roles
Crosby is a non-executive director of television company ITVITV
ITV is the major commercial public service TV network in the United Kingdom. Launched in 1955 under the auspices of the Independent Television Authority to provide competition to the BBC, it is also the oldest commercial network in the UK...
, and a trustee of charity Cancer Research UK
Cancer Research UK
Cancer Research UK is a cancer research and awareness charity in the United Kingdom, formed on 4 February 2002 by the merger of The Cancer Research Campaign and the Imperial Cancer Research Fund. Its aim is to reduce the number of deaths from cancer. As the world's largest independent cancer...
.
In January 2009, it was reported that James Crosby will become the Chairman of Misys
Misys
Misys plc is a business that makes and sells software to banking, investment, and, formerly, to medical businesses. The company merged its healthcare information technology division with Allscripts in 2008...
.