Moore: banking system cannot be rebuilt without forensic inquiry

November 3rd, 2009

Paul Moore, the whistleblower who was personally fired by HBOS chief executive Sir James Crosby for raising red flags about the bank’s sales-mad culture, appeared on Channel 4 News earlier this evening.

Moore, whose testimony provided welcome relief from the disingenuous claptrap we heard from guilty bank bosses during the Treasury select committee last February, was interviewed by Channel 4’s Jon Snow.

Moore’s main contention is that unless there’s a proper inquiry into the causes of the collapse of Ponzi-like banks such as HBOS and RBS, government attempts to keep them afloat with massive transfusions of taxpayers’ cash are bound to fail. it will be a case of continuing to throw good money after bad.

Or as Moore put it, we’re scrabbling around in the dark in our attempts to reconstruct the system unless we first find out what went wrong, why the system failed so catastrophically.

So far, the government has not shown much of an inclination to hold such an inquiry — probably because that Gordon Brown and Labour generally are so frightened they would be implicated, largely because of their previous misguided faith in “light touch” regulation and their chuminess with senior bankers such as HBOS’s Sir James Crosby.

Unless we find out what was really going on inside banks (not just in boardrooms but lower down the ranks, for example in Bank of Scotland Corporate‘s Reading branch and in the Manchester branch of Bank of Scotland),  throwing an additional £54bn their way will turn out to be profligate as the lending practices of Peter Cummings, ex-boss of HBOS’s corporate division. Moore said:

“There hasn’t really been a proper inquiry into who did what and who didn’t do what in the boardrooms of those banks. We had a Treasury Select Committee review, which was at one level of forensic detail, and, really, many of the existing managers that were there before are still there in charge and there hasn’t really been a proper investigation.

Snow, who seemed unecessarily twitchy with some of Moore’s responses, asked the ‘whistleblower’ what more needs to be done to make the banks “a safe bet”. Moore said:

“Well there’s a lot of things to be done. One of the things I’d say is that not a single politician, not a single regulator and not a single bank director has been in any way shape or form held to account and because we haven’t actually inquired as to precisely who did what, we don’t really know how to reconstruct the system.”

“The system has to be reconstructed completely in order to balance the powers in the boardrooms and to make sure that the control functions — risk management,  compliance, internal audit  — have an equal voice in those boardrooms. At the moment that’s not being done.

Moore, group head of regulatory risk at HBOS in 2002-04, also suggested that, during Lloyds TSB’s acquisition of HBOS, the bank’s shareholders were kept in the dark about the merits of the deal and that it failed to highlight the £260bn plus of toxic assets on HBOS’s balance sheet. Snow was extremely nervy when Moore started talking about this.

• The Daily Telegraph’s Jeremy Warner today said the fresh £54bn the government  is pouring into the banks will benefit nobody, and that the only real winners for its decision to force Lloyds and RBS to make divestments will be investment bankers and lawyers. See This smorgasbord of banking announcements looks a terrible mess.

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Posted by Ian Fraser on Nov 3 2009. Filed under Blog. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry