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The curious case of Paul Moore and HBOS

The FT helpfully printed the full Paul Moore memo in today's paper here.

To be honest his claim that he was replaced by a manager, at the approval of the CEO, with no previous risk management experience does not in the least bit surprise me.

In my experience for every hard working, dilligent and compenent risk manager working inside banks over the past few years there seems to be an equal number of 'managers' who not only have little or no experience of proper risk management techiques and controls but little understanding of the role of the risk manager within financial firms.

We have been fed a line by many banks about the how highly they value their risk management departments and the quality of control within.

Below are more words of wisdom from the outesd Paul Moore. A few years ago they would be just words. Now, let's hope boards of directors read them, understand them and get them embroidered on a pillow. (some may feel tattooed onto their foreheads.)

"I believe that, had there been highly competent risk and compliance managers in all the banks, carrying rigorous oversight, properly protected and supported by a truly independent non-executive, the external auditor and the FSA, they would have felt comfortable and protected to challenge the practices of the executive without fear for their own positions. If this had been the case, I am also confident that we would not have got into the current crisis. I believe that my personal story of what happened at HBOS demonstrates this exactly."


Comments: (3)

A Finextra member
A Finextra member 13 February, 2009, 12:41Be the first to give this comment the thumbs up 0 likes

Are you suggesting that there may not have been a sufficiently robust risk culture within the banks Liz?!

Paul Moore's disclosure is significant in that it removes ignorance as an explanation (although it could never be an excuse) - something which many at board level have sought to hide behind over the past year - 'we didn't know about it, so how could we have prevented it...'. Moore's claims, if true, make the board firmly accountable and ultimately culpable. I see 'SOX-like' regulation on the horizon, with formal sign off of risk positions against the CEO's name.....then we'll see the risk culture start to change.


Elizabeth Lumley
Elizabeth Lumley - Girl, Disrupted - Crayford 13 February, 2009, 13:13Be the first to give this comment the thumbs up 0 likes

A robust risk culture that needs to be undertood by those actually working in risk?! Matthew, what strange and wonderfull world are describing?

Really, just post your Risk Mission Statement up on a sandwich board in the lobby of your bank's headquarters and everyone will automatically have a full understanding of the bank's risk culture. I've heard that screen savers work well in that department as well! 

Stanley Epstein
Stanley Epstein - Citadel Advantage Ltd - Modiin 16 February, 2009, 18:09Be the first to give this comment the thumbs up 0 likes

Bravo Elizabeth for saying out loud what many of us have known all along. Bank Boards and bank CEOs don't like bad news and invariably, if they are doing their jobs properly, Risk Managers and their views are NOT welcome especially if it could damage profits and more importantly, bonuses.

I want to add a quote from my blog entitled "Lip Service" (8th October 2008)  -

"It's a contest between profit and extra costs and the profit motive always wins out. Bank executives don't like Jonahs (i.e. a person who carries a "jinx", one who will bring bad luck to any enterprise). Profits get them bonuses. Costs reduce profits. Also the "whiz kid" innovators are like the golden goose and you don't tell them that their eggs are inedible!"

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