Sir James Crosby "falls on his sword" as the whistle is blown on gagging claims.

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Sir James Crosby "falls on his sword" as the whistle is blown on gagging claims.

In a show of fortitude, recently appointed deputy chairman of the Financial Services Authority (FSA) resigned his post, largely due to accusations that during his term as HBOS chief executive he placed blocks on reports from his head of risk management at the Bank, Paul Moore. Moore's warned in several reports to Sir James that the bank was on a path to ruin due to the inordinate risks that they were taking.

Crosby appeared to do what was the right thing, stepping down from his role in the FSA a mere 24 hours after Moore blew the whistle on the "gagging" claims. Especially embarrassed by the resignation was Prime Minister Gordon Brown who had earlier claimed that he had "full confidence" in Sir James's ability and integrity.

Never slow to take political advantage, Opposition Leader David Cameron claimed that Brown's appointment of Sir James in a key role at the FSA, as well as a key financial advisor in other roles, raised serious question marks regarding his judgment. Gordon Brown was seen to be obviously uncomfortable when pressed on the subject during Parliamentary question time, avoiding the issue by stating that "Sir James Crosby is no longer a Government employee."

He did receive some perfunctory backing from the Prime Minister who insisted that Sir James was entitled to defend himself against the "gagging" claims made against him by Paul Moore, who held down the role as risk moderator at HBOS up until 2005.

When questioned in recent interview Moore claimed that the reason behind his sacking was that he had raised a series of challenges in reports made directly to Sir James with which the bank head was uncomfortable about accepting. He added "the somewhat lame reason that the bank gave for my dismissal was that I didn't fit in.'

Gordon Brown appeared to have no option than to back Sir James's resignation so that he could devote all of his energy to clear his good name in financial circles. The Prime Minister did hasten to add 'It is important that the FSA show at this time that it is operating to the best standards possible. The review that has been set up will look at exactly these matters, of risk management, remuneration and the performance of bank boards. I believe the system of regulation in this country can and will be improved.'"

In a statement yesterday, Downing Street rejected claims that Sir James had been forced to resign stating that the resignation was Sir James decision only.

The issue came to light when Paul Moore made a written submission to the Treasury select committee yesterday who are investigating the financial crisis in the banking community. Moore confirmed that he had "blown the whistle" on Sir James in particular as well as others at the HBOS who during his tenure had ignored warnings that the bank was 'going too fast',

In his resignation letter Sir James stated his confidence in the fact that while there was no substance in Moore's allegations, he was confident that the right course of action was to resign from the FSA board.

Crosby also hastened to add that an independent investigation ordered by the HBOS had backed his decision to dismiss Moore. Sir James added: 'HBOS has reiterated its view that his allegations have no merit. Whilst I am totally confident that there is no substance to any of the allegations, I nonetheless feel that the right course of action for the FSA is for me to resign from the Board which I do with immediate effect.'