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Former HBOS Head of Group Regulatory Risk represented by Clive Howard

01 March 2009

Clive Howard represented the former HBOS Head of Group Regulatory Risk Paul Moore in his giving of evidence before the House of Commons Treasury Select Committee investigating the 2007-2009 banking crisis. Paul Moore was Head of Group Regulatory Risk at HBOS between 2002 and 2005. The role entailed responsibility for the adequacy and effectiveness of the systems and controls for the whole of HBOS for ensuring compliance with FSA requirements. It was a key duty of his job that he raised challenges where necessary in relation to the way FSA approved persons in the bank carry out their duties, particularly, in relation to their integrity, care and diligence. Any failure to challenge in appropriate circumstances would have constituted a dereliction of duty to HBOS and could potentially have lead to personal disciplinary by the FSA against our client. In 2005 Mr Moore was dismissed from his post, on the grounds of alleged redundancy due to a restructuring of the compliance function at the bank, according to HBOS. Following Mr Moore's evidence before the select committee, and subsequent front page media coverage, the Prime Minister's banking adviser Sir Ian Crosby, a former HBOS CEO, resigned from his post as deputy chairman of the FSA. In March 2009, Lord Turner published a regulatory review of the financial crisis which acknowledges that 'light touch' regulation had failed but as yet no significant overhaul of banking regulation has occurred in response to the failings exposed in the 2007-2009 crisis.

While whistleblowing in banking is not uncommon, and is an active area of work for Russell Jones & Walker, it is rare for a banking whistleblowing claim to make it into the public domain. Cases are usually settled, with the whistleblower paid a generous settlement on the condition that they sign a gagging order preventing them from disclosing regulatory breaches.

The manner in which the banking industry deals with FSA whistleblowers exposes a conflict of interest between senior staff at banks, who can  have an interest to suppress information or news of excessive risk, and shareholders who have a right to transparency in terms of a the risks that banks are taking. Staff who work in the risk management and compliance fields at banks, who have a duty to report on risk and compliance issues but are nevertheless employed by the banks themselves, are frequently at the sharp end of this conflict of interest.