Britannia Radio

The supposed "grilling" (aka 'patsy" questioning] of Gordon Brown by 
a parliamentary committee is, as I write at 10.50, under way but no 
definitive report is yet out - though the net is alive with reports 
written as if the reporter was there but clearly was not having 
written it all i n advance.  Politics Home carries a statement 
listring what he said but this gives no indications of any questions 
at all and is no more than a No:10 press handout, though not tagged 
as such.

We'll have to wait therefore!
xxxxxxxxxxxxx cs
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THE GUARDIAN      12.2.09
Banks regulator forced to quit on Brown's black day
. Banks regulator forced to quit
. Unemployment almost at 2m
. Economy 'to shrink by 4%'
. FSA concern over HBOS risks

. Patrick Wintour, Jill Treanor and Simon Bowers

Gordon Brown suffered his darkest day of the recession yesterday when 
he was forced personally to sanction the removal of one of his 
closest banking allies as a City regulator, unemployment climbed to 
two million and the Bank of England warned that the economy will have 
shrunk by a chilling 4% by the summer.

Sir James Crosby was forced out of his job at the Financial Services 
Authority after allegations by a whistleblower. But to add to Brown's 
woes, it emerged that the FSA had taken on Crosby as its deputy 
chairman even though it had been concerned about the risks being 
taken by the HBOS banking group he had been running since 2002.
In a statement issued last night the FSA admitted it had long-
standing issues with the way HBOS managed the risks it took but was 
not concerned enough to prevent Crosby becoming one of Britain's most 
influential regulators.

In a further blow to the prime minister, the Guardian has learned 
that senior bankers warned cabinet ministers this week that although 
they support an overhaul of city bonuses, they will resist the freeze 
demanded by the public; they said traders would simply defect to 
competitor banks if they were not rewarded.

Brown will come under renewed pressure today to clarify his policy on 
bonuses - and his handling of the economy more generally - when he is 
quizzed by select committee chairmen for two hours. [This started at 
10am, with the BBC talking of the exchanges at 10.15 before any 
substantive reports could have reached them!  -cs at 10.25!]

On a day of more dire economic forecasts and deepening job losses, 
Brown moved to distance himself from the bankers widely blamed for 
Britain's recession, by cutting loose Crosby, who he had appointed to 
regulate the City. Crosby resigned suddenly - 30 minutes before prime 
minister's questions - after a wave of criticism over the 
whistleblower's allegations outlined at the treasury select committee 
on Tuesday.

Addressing the Commons, Brown supported Crosby's decision, adding: 
"It is right we investigate serious allegations that are made about 
the banking system. These are serious but contested allegations."

No 10 is understood to have suggested to the FSA that Crosby needed 
to be very confident of his position if he was to stay, but the prime 
minister's spokesman insisted the decision to quit had been made by 
Crosby alone. Shadow chancellor George Osborne accused the government 
of engineering Crosby's resignation.

Despite Crosby's departure, the FSA supported its former deputy 
chairman, arguing the the whistleblower had raised his concerns only 
when he become concerned about his own job.  [Wouldn't you be 
concerned if you couls see that your employer was heading for a 
crash! -cs]

Crosby's downfall was triggered by allegations from Paul Moore, 
former head of regulation risk at HBOS, that he had been sacked by 
Crosby, then HBOS chief executive after warning that the company was 
growing too fast. [Well it was, and way ahead pf any incoming 
deposits -cs]

Crosby insisted the allegations had no merit, but that he had stood 
down for the good of the FSA. He claimed an independent inquiry by 
auditors KPMG had acquitted him over Moore's dismissal, a claim 
backed up last night when a version of the KPMG inquiry, seen by the 
Guardian [and Newsnight and all the other papers -cs] , showed 
procedures had been followed and that there had been personality 
clashes.

KPMG stressed its inquiry had had a narrow focus, and had not 
examined the wider claims about the dangerous strategic direction of 
his bank.
Last night the FSA tried to defend its actions and the way it had 
handled the allegations by Moore. It revealed it had first 
"identified a need to strengthen the control infrastructure within 
the group" in 2002 and that it was that review that had ultimately 
required the bank to restructure the risk management function and 
ultimately led to the role held by Moore being made more senior.

But the regulator also revealed it wrote a letter to HBOS on 26 June 
2006 - a month before Crosby left - to pursue concerns about the 
"risk management framework". The FSA had warned: "The growth strategy 
of the group posed risks to the whole group and that these risks must 
be managed and mitigated." Crosby was appointed FSA deputy chair in 
late 2007 and has been on the board since 2004.

Meanwhile, senior bankers grilled for a second day by the treasury 
select committee admitted some aspects of City pay structures had 
"not served either the industry or society well". John Varley, 
Barclays chief executive told MPs: "If you look at the failure in the 
banking system over the last two years, it is clear the banks have 
contributed to that failure and it is clear part of that problem has 
been the issue of compensation." Stephen Hester, chief executive of 
RBS, in which the government has a majority shareholding, said: 
"Banking pay in some parts of the industry is far too high and needs 
to come down."

The furore over bonuses and Crosby overshadowed a dire warning by the 
Bank of England governor, Mervyn King, that the UK is in "deep 
recession". He said the length and depth would depend on developments 
in the rest of the world. Giving the bank's quarterly inflation 
report, King tore up forecasts made three years ago and said the 
economy would shrink by 4% on an annualised basis by the summer. But 
he warned it could shrink by as much as 6%.