Former HBOS CEO quits as UK's FSA chief

12 February 2009

The supposedly independent experts hired by HBOS PLc to investigate allegations of serious failings at the bank in 2005 had been receiving millions of pounds in fees from the company for years, it has been revealed.

KPMG, which was hired by Lord Stevenson of Coddenham, the HBOS chairman at the time, to investigate claims by a whistle-blower, Paul Moore, had received fees for auditing, tax advice, information technology work and compliance advice.

Last year it was paid £11.4 million in fees by HBOS and the year before £11.2 million, and it had had a close relationship with the bank since 2001, when it was appointed auditor. HBOS is understood to be one of its biggest clients in the UK.

Lord Stevenson told MPs on the Treasury select committee earlier this week that the Financial Services Authority (FSA) was satisfied with the KPMG report and regarded the matter as closed. He described it as "independent".

Moore, the head of risk at HBOS from 2002 to 2005, accused HBOS and its former chief executive, Sir James Crosby, of fostering a culture where growth and sales took precedence over financial prudence, and of stamping out any opposition to that system.

Crosby, appointed as Britain's financial regulator by Prime Minister Gordon Brown, resigned on Wednesday after claims that he fired Moore for blowing the whistle.