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Brown defends Crosby appointment Brown defends Crosby appointment
(20 minutes later)
Gordon Brown has defended his choice of ex-HBOS chief Sir James Crosby to be deputy head of City regulator FSA in 2003, as he is grilled by senior MPs.Gordon Brown has defended his choice of ex-HBOS chief Sir James Crosby to be deputy head of City regulator FSA in 2003, as he is grilled by senior MPs.
The prime minister's twice-yearly session facing the chairmen of all the Commons committees started at 1000 GMT.The prime minister's twice-yearly session facing the chairmen of all the Commons committees started at 1000 GMT.
It comes the day after Sir James resigned as deputy chairman of the FSA.It comes the day after Sir James resigned as deputy chairman of the FSA.
Mr Brown said he appointed Sir James on an independent panel's recommendation and said he had not known at the time the FSA had any concerns about HBOS.Mr Brown said he appointed Sir James on an independent panel's recommendation and said he had not known at the time the FSA had any concerns about HBOS.
Sir James Crosby resigned as deputy chairman of the FSA - the Financial Services Authority - after claims from HBOS's former head of risk that he had been axed by him after warning that the bank was growing too fast.Sir James Crosby resigned as deputy chairman of the FSA - the Financial Services Authority - after claims from HBOS's former head of risk that he had been axed by him after warning that the bank was growing too fast.
Warnings
Mr Brown insisted whistleblower Paul Moore's allegations had been investigated by the FSA and found to be unfounded.Mr Brown insisted whistleblower Paul Moore's allegations had been investigated by the FSA and found to be unfounded.
The short-term bonus culture in banks has got to end and we are putting in measures that will bring that to an end Gordon Brown
He added that the problems alleged by Mr Moore were not the reason HBOS fell: "It was because its whole business model was wrong."He added that the problems alleged by Mr Moore were not the reason HBOS fell: "It was because its whole business model was wrong."
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HBOS and Sir James have both denied Mr Moore's allegations, but it emerged on Tuesday that the FSA had warned the merged Halifax/Bank of Scotland group about its business model.HBOS and Sir James have both denied Mr Moore's allegations, but it emerged on Tuesday that the FSA had warned the merged Halifax/Bank of Scotland group about its business model.
In a statement the regulator said it had raised concerns about the way HBOS was being run as far back as 2002 before and after Mr Moore left the company.In a statement the regulator said it had raised concerns about the way HBOS was being run as far back as 2002 before and after Mr Moore left the company.
Questions had been raised by opposition MPs about whether Mr Brown, who was then chancellor, was aware of the warnings about the business model of the bank, which had to be rescued using taxpayers' money last year.Questions had been raised by opposition MPs about whether Mr Brown, who was then chancellor, was aware of the warnings about the business model of the bank, which had to be rescued using taxpayers' money last year.
Mr Brown is also being questioned about bonuses for bank bosses and his wider handling of the economy - with his pledge of "British jobs for British workers" a possible topic given recent protests. 'Bonus culture'
Mr Brown was challenged by Labour MP John McFall, chairman of the Treasury Committee, about why the government was not taking action on bank bonuses.
He said: "The short-term bonus culture in banks has got to end and we are putting in measures that will bring that to an end."
He said bonuses should be based on performance over a number of years and also should not be a "one-way bet".
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"I think the Financial Services Authority should be given the right in regulation to penalise a bank which is basing its reward system on short-term deal making rather than long-term performance.
"I believe the bonus structure has got to be over a number of years and not over one year, if it is to exist at all in these banks, and at the same time it should never be a one-way bet.
"In other words, if you fail there is a claw back that Is also possible within a bonus system."
Banking reform
He said lessons had to be learned from what had happened in banking and the regulatory system had to be "improved".
But he added: "What we are dealing with is a global banking system that is regulated only by national supervisors. I've been pressing for some time that this has got to be replaced by a national system side by side with global cooperation amongst regulators."
"We will push ahead at the G20 meetings in London for reforms not only of national systems but for international regulations for the banking system."
Mr Brown is also being quizzed about government initiatives aimed at helping businesses and individuals through the recession.
He denied chasing headlines by coming up with one scheme after another without following them through, saying: "What we have done, with a few exceptions, has now been followed by other countries around the world."
Although the session in Westminster is expected the focus mainly on the economy, the two-and-a-half-hour hearing is also expected to focus on foreign affairs.Although the session in Westminster is expected the focus mainly on the economy, the two-and-a-half-hour hearing is also expected to focus on foreign affairs.
'Deep recession''Deep recession'
The themes are selected in advance, although Mr Brown is not given prior notification of the questions.The themes are selected in advance, although Mr Brown is not given prior notification of the questions.
MPs will ask the prime minister about its consequences for the private and public sectors, as well as its impact internationally.MPs will ask the prime minister about its consequences for the private and public sectors, as well as its impact internationally.
Bank of England governor Mervyn King said on Wednesday that the UK was in "deep recession".Bank of England governor Mervyn King said on Wednesday that the UK was in "deep recession".
It was also revealed that UK unemployment had risen to 1.97 million between October and December, the highest level since 1997.It was also revealed that UK unemployment had risen to 1.97 million between October and December, the highest level since 1997.
Thursday's liaison committee session will be the third time Mr Brown - who came to power in June 2007 - has faced the MPs' questions.Thursday's liaison committee session will be the third time Mr Brown - who came to power in June 2007 - has faced the MPs' questions.
Chancellor Alistair Darling is to face Treasury questions in the House of Commons chamber.Chancellor Alistair Darling is to face Treasury questions in the House of Commons chamber.
Meanwhile, Liberal Democrat leader Nick Clegg will deliver a speech calling for a return to "traditional, narrow high street banks".Meanwhile, Liberal Democrat leader Nick Clegg will deliver a speech calling for a return to "traditional, narrow high street banks".
He will add: "Institutions that consumers and small businesses depend on for savings and loans should not be put at risk by the casino culture of investment banking."He will add: "Institutions that consumers and small businesses depend on for savings and loans should not be put at risk by the casino culture of investment banking."