Banking Crisis - Treasury Contents

Supplementary memorandum from Lord Stevenson of Coddenham

  As promised when we met on 10th February, I am writing to enclose a copy of the Report prepared by KPMG in 2003. As I explained when I appeared before the Committee, whilst HBOS was comfortable that everything in relation to Mr Moore's departure from the Company was handled properly, we took the allegations made by Mr Moore very seriously. As soon as the then CEO learned that Mr Moore was unhappy with the process that led to him not being offered the job as Risk Director and had concerns about the handling of risk management, the CEO told the FSA and the HBOS Board. As a result of the process of consultation that followed with the Chairman of the HBOS Audit Committee playing a major role, we asked KPMG to look in to those allegations independently. That is how the KPMG Report came about.

  The scope of the KPMG review is set out in the five bullet points in paragraph 1.1, as well as the supplementary issue referred to in paragraph 1.2. As the Report makes clear, KPMG conducted about 80 hours of meetings and interviews involving 28 individuals, and reviewed large quantities of HBOS documents (in addition to the documents produced by Mr Moore). As a consequence, Mr Moore's allegations were not substantiated, and the Company's position was validated.

  I do not believe it is necessary or appropriate for me to summarise the Report, which speaks for itself. You will have seen, however, the statement made by the FSA on 11th February 2009, which includes a number of quotes from or references to the conclusions in the KPMG report, including the following:

    —  that the structure and reporting lines of Group Regulatory Risk were appropriate;

    —  there was no evidence to suggest that Mr Moore was dismissed for improper reasons. There was simply no role for Mr Moore in the revised structure that followed the creation of the Group Risk Director role;

    —  the process for identification and assessment of candidates for the GRD (Group Risk Director) role was appropriate; and

    —  KPMG believed that the evidence reviewed suggested that the candidate (for the Group Risk Director role) was appropriately "fit and proper".

  Separately, I understand that the Chairman of the Financial Services Authority may have written to the Chancellor of the Exchequer in very similar terms to the FSA 11th February statement.

  If I can help the Committee with respect to any further information that it requires, please do not hesitate to let me know.

26 February 2009

Review of issues set out in the Outline of Case from Paul Moore




  1.1  Paul Moore raised a number of issues concerning the operation of the Regulatory Compliance control environment within HBOS plc ("HBOS") in the "Outline of Case" dated 13 December 2004. You have instructed us to undertake an independent review of the issues raised by Mr Moore. We held an initial clarification meeting with Mr Moore following which we agreed the scope of our terms of reference with you. These were shared with Mr Moore. In accordance with our engagement and scoping letters dated 17 and 24 January 2005 respectively we have undertaken a focused review of:

    —  the Group Regulatory Risk ("GRR") relationship with the Board, the executive divisional management and relevant associated risk and audit committees;

    —  the appropriateness of GRR structure and processes for fulfilling their oversight and monitoring responsibilities;

    —  the chronology, methodology, reporting and follow-up resolution of the Mortgage Endowment Complaints ("MEC"), Corporate Bond Fund ("CBF"), and Sales Culture ("SCR") reviews performed in 2003/2004 and relevant recommendations set out in Appendix 1 of the PWC report on the risks management framework;

    —  the appropriateness of the Group's processes for identification and assessment of candidates for the Group Risk Director and appointment of Jo Dawson; and

    —  whether the Group followed its defined processes when making the position of the head of GRR redundant.

  1.2  You subsequently asked us to consider whether the way in which the CBF, MEC and SCR reviews were approached, the reaction to them and the follow-up response are indicative of a Group that takes its regulatory responsibilities seriously.

Work performed

  1.3  Our work has involved undertaking interviews and reviewing documentation provided to us by HBOS. We have focused our work on the areas highlighted by Mr Moore, in particular the reviews undertaken in respect of MEC, CBF and SCR. In the Outline of Case, there is also introductory references at paragraphs 3 and 4 (expanded in paragraphs 45-56) about the appropriateness of the appointment of Ms Dawson and we address the regulatory issues arising, below. We have not considered any other reviews undertaken by GRR within the Retail or other HBOS divisions.

  1.4  In addition to the regulatory issues raised, the Outline of Case also raises employment issues (eg Paragraphs 5 and 6 of the Outline of Case). These fell outside our expertise and we have not considered any aspects of employment law, including reference to the Public Interest Disclosure Act, during the course of our work.


  1.5  We have undertaken around 80 hours of interviews and meetings with 28 individuals (see appendix 1) during the course of our work including a number of third parties. Following each interview and meeting we have prepared a record of the discussion and asked for comments from individuals concerned. Where individuals have provided amendments or additional comments we have considered the comments, revised and re-issued the transcript meeting note if appropriate.

  1.6  We have undertaken the interviews and discussions on a confidential basis.

Document review

  1.7  During the course of our work we have requested, reviewed and analysed a variety of documents. Appendix 2 lists the key documents. These documents have all been provided by HBOS, consequently we have not attached them to this report.

  1.8  Throughout the course of our work we have made document requests and have relied upon the information provided to us and have not verified this information for accuracy. We have also assumed that all the documents relevant to the requests have been provided.


  1.9  You have requested we set out our findings in a short "board paper" style report. Our usual report format would be longer and detail all the information and documentation gathered during the course of our work together with our analysis of this information and documentation.

  1.10  This report to the HBOS Group Audit Committee sets out our findings in respect of the work we have undertaken relating to each of the bullet points at paragraph 1.1. We reported our preliminary findings orally to the Group Audit Committee on 8 March 2005 and the content of this report it consistent with those findings.

  1.11  We found that there were some discrepancies between the exact dates and chronology of events arising from the interviews conducted. On occasion we have used our best judgement to identify the relevant dates and chronology. However we do not believe that such judgements are critical in forming our views.

  1.12  On occasion we have referred to certain classes of individuals within the report, for example the non-Executives. Where we have done so this should be taken to be individuals that we have interviewed which fall into that class rather than the whole of that class.

  1.13  This report is confidential. It may not be disclosed, copied, quoted or referred to in whole or in part, whether for purposes of disciplinary proceedings or otherwise without our prior written consent. Such consent, if given, may be on conditions including, without limitation, an indemnity against any claims by third parties arising from release of any part of our report. KPMG will not be held responsible or liable to any third parties who may come to act upon this report without prior written consent of KPMG.

  1.14  We have structured this report as follows:

    —  Section 2—GRR's relationships with key stakeholders.

    —  Section 3—GRR's structure and process for fulfilling their oversight and monitoring responsibilities. This section incorporates our consideration of the reviews undertaken in respect of MEC, CBF and SCR.

    —  Section 4—The appointment of the Group Risk Director.

    —  Section 5—The redundancy of the Head of GRR position.



  2.1  This section summarises the comments we have received concerning GRR's relationships with key stakeholders. Mr Moore's role as Head of GRR and his personality resulted in many people identifying GRR and Mr Moore as being one and the same. It should be noted that Mr Moore, as Head of GRR, was regarded as the natural point of contact and seen by many to have been GRR. As such most of the comments offered by interviewees are personalised to Mr Moore and perceptions of his performance in his role as Head of GRR.

Senior Executives

  2.2  The views of the Executive Directors were mixed. Most recognised that Mr Moore had sound technical skills and that he gave GRR a sense of purpose. In particular it was felt that he created the right environment within GRR through recruiting strong individuals and building a team spirit. A number of senior Executives referred negatively to Mr Moore's behaviour and performance at meetings. Some also noted that increasingly throughout 2004 Mr Moore brought his deputies to meetings. There was a mixed view about his capability to successfully execute the role of Head of GRR. Concerns were expressed that Mr Moore was not able to step up to the more demanding role of Head of GRR from his previous position within IID.

The non-Executive Directors

  2.3  By late 2004 the Non-Executive Directors interviewed had a consistent view of Mr Moore. Most considered Mr Moore to be an intelligent individual, technically strong with a great deal of experience. However, consistent negative comments were made regarding Mr Moore's personal behaviour and relationship skills. In particular, reference was made to Mr Moore's performance at various formal meetings in both 2003 and 2004, the most notable being the 8 June 2004 Group Audit committee meeting, which was commented on widely.

  2.4  During 2004 Mr Moore held individual meetings with a number of non-Executives. Some of these were not comfortable with these meetings as Mr Moore had not always exhausted other reporting channels, they did not see this as a non-executive's role; and, he tried to impose an element of confidentiality to the meetings. In contrast Mr Moore did not have a private meeting with the Chairman of the Audit Committee until December 2004 after the announcement of his departure. This is despite requests being made by the Chair of the Audit Committee in March 2004 for a meeting to be scheduled to discuss whether the GRR team needed a different relationship with the Audit Committee.

  2.5  The non-Executives interviewed lost confidence in Mr Moore at different times following a range of events. It is now clear that some were nervous about his appointment to the role of Head of GRR, while others became increasingly concerned following on from specific events during 2004.


  2.6  In January 2004, HBOS received an FSA Arrow letter which highlighted a number of key concerns: one key outcome being was the FSA's decision to raise HBOS's ICR by 0.5%. The significance of this signal was recognised by HBOS. Senior management were upset by the FSA's decision to raise the ICR at that time but the response to the concerns raised by the FSA was constructive. Mike Ellis (Group Finance Director—to whom the Risk functions reported) in particular was focussed on implementing the necessary corrective actions across the main business control functions. These, as noted in the outline of Case were Sales Cultural (Retail), Credit Process (Corporate), Embedded Value (IID) and Risk (Group Functions). The efforts by the senior management team were rewarded towards the end of 2004 when the FSA agreed to remove the 0.5% increase from the ICR.

  2.7  Throughout this period the FSA wanted to develop a "close and continuous" relationship with HBOS whereby they could place increased reliance on the group control functions including all the risk functions and internal audit to mitigate the risks the Group opposed to the FSA's objectives. The Outline of the Case seems to indicate that this "close and continuous" relationship was special to HBOS. It is a general term used for all major groups supervised by the FSA and a feature of most large financial institutions' Risk Mitigation Programmes.

  28.  Mr Ellis retained ultimate responsibility for the FSA relationship as stated in his Management Accountability Plan ("MAP"). The FSA directed a number of its communications through the Divisional leadership. The pattern of meetings with the FSA led to Mr Moore being bypassed in respect of certain communications although a member of this GRR team attended the majority of FSA meetings. In the case of both the MEC and SC reviews, senior executives liaised directly with the FSA. This was consistent with the importance being attached to reducing the ICR. From the FSA's perspective in particular, James Davies is credited with developing a good relationship with the regulator.



  3.1  HBOS takes a devolved approach to regulatory risk management and adopts a "three lines of defence" governance model. The first line of defence rests with the Business/Operating division and includes the divisional risks teams. The second line of defence is provided by the Group Risk functions (including GRR) and the third line of defence is provided by Group Internal Audit. The devolved model of risks management in place at 30 April 2004 was subject to a S166 review by PWC. PWC concluded that the model used was conceptually well designed and appropriate for HBOS.

  3.2  Paragraphs 9-11 of the Outline of Case summaries the responsibility of the Head of GRR to oversee the adequacy, effectiveness and compliance of the systems and controls in place within the HBOS Group, as the compliance oversight control function CF10. It is in this context that the Outline of Case goes on to raise a number of issues concerning the Regulatory Compliance control environment within HBOS.

  3.3  The Head of GRR is clearly an important role within the Regulatory Compliance control environment; however, this individual does not carry sole responsibility for Regulatory Compliance. It is the responsibility of all senior management who are in a position of significant Influence to raise challenges and oversee systems and controls. This is consistent with the FSA's rules concerning Senior Management Systems and Controls ("SYSC") and in particular the code of practice for approved persons ("APER").

  3.4  Within HBOS responsibility and accountability for systems and controls is set out within the MAPs. The MAPs set out the interaction of the senior management team. This interaction needs to work in practice to enable an effective governance structure. There is a good understanding of these responsibilities based on our discussions with the executives interviewed.

GRR structure and resources

Reporting lines

  3.5  Prior to his appointment as Head of GRR Mr Moore was responsible for the Group Regulatory Risk function within the Insurance and Investment Division ("IID"), reporting to both Phil Hodkinson as Head of IID and Arthur Seiman as head of GRR. The IID Group Regulatory Risk ("IID GRR") team's remit included oversight of the Retail division's regulated products which were managed by the Retail Advisory Sales team.

  3.6  In October 2003 Mr Moore was appointed Head of GRR (effective 1 January 2004) and the IID GRR function was subsumed within GRR. Prior to this restructuring, it is clear there was confusion concerning the role of the two Group Regulatory Risk functions and its oversight responsibilities. His confusion arose from there being:

    —  no clear reporting or responsibility lines between GRR, IID GRR, Retail Regulatory Risk ("RRR") and/or Retail management;

    —  no clear definition of the `functional leadership' or `oversight' role that GRR and IID GRR should undertake as referred to in the `Overview of HBOS Corporate Governance' dated 18 September 2001 and Management Accountability Profiles; and

    —  overlap between the two Group Regulatory Risk functions overseeing the Retail Division.

  3.7  Appropriate reporting lines for the Group Regulatory Risk functions were in place during 2004. The Head of GRR reported in to the Group Financial Director and also had the right to escalate any key issues to the Divisional Chief Executives and where necessary the Group Chief Executive. In addition, the Chairman of the Audit Committee was also available to the Head of GRR.

  3.8  Whilst the restructuring referred to above removed the confusion surrounding the interaction between IID GRR and GRR, confusion surrounding the remit of GRR remained during 2004 (see below). In addition, no further clarity was given regarding the definition of "functional leadership" or "oversight". Confusion arose, in particular, over the interaction between GRR and RRR. A draft Memorandum of Understanding existed between the functions. However, it is not clear what reference was made to it or reliance placed on it by GRR and RRR.

GRR Business Plans

  3.9  One of the first tasks undertaken by Mr Moore on his appointment as Head of GRR was the preparation of the 2004-05 GRR Business Plan and Strategy document ("Business Plan") which was tabled at the 9 December 2003 Audit Committee meeting. This document was subsequently amended to take account of the FSA's views and outcome of the FSA Arrow Risk Assessments. It was re-presented to the Group Audit Committee on 9 March 2004. In addition, the Business Plan was further discussed as a private Audit Committee meeting held on 8 June 2004.

  3.10  The 2004-05 GRR Business Plan and Strategy document is a high level document. A GRR conference was held in late February 2004 at which an oral presentation alongside the Business Plan seems to have worked well. The lack of risk assessment, detailed plans or operating methodology in the Business Plan would have made it more difficult to be cascaded as a stand alone document. By not actively rolling out the Business Plan to the Retail division management. GRR missed an opportunity to explain their assessment of the key regulatory risks facing the Retail division and action planned to address these risks. As a result GRR does not appear to have effectively engaged key stakeholders thereby missing an opportunity to address some of the confusion surrounding GRR's remit.

  3.11  The 2005-06 GRR Business Plan and Strategy document was presented to the Retail Risk control Committee on 2 December 2004 and to the Group Audit Committee on 7 December 2004. This document is more detailed than the 2004-05 Business Plan and includes a section on risks detailing a timetable of work to be undertaken during 2005. We have received comments and agree that this document was a significant improvement on the 2004-05 Business Plan.

Communication and interaction between parties

  3.12  Concerns were raised at the 8 June 2004 private meeting of the Audit Committee regarding the quality of the Business Plan. Comments refer to a lack of content, the self-promotion of GRR and it being to driven by the requirements of the FSA rather than the business. At this meeting Mr Ellis supported the document as "a good motivational tool for colleagues within Group Regulatory Risk and the challenge remained to address the focus of resource and ease the tensions between GRR and the Businesses". We have seen nothing to suggest that the comments raised at the meeting were communicated to Mr Moore. However, the fact that this meeting needed to be held was one of the contributory factors leading to the non-Executives losing confidence in Mr Moore.

  3.13  It is not clear how the Business Plan was rolled out to the Retail or other divisional management teams. None of the relevant interviewees could recollect such a roll-out. The minutes for the group Management Board, Retail Risk Control Committee and Group Operational and Regulatory Risk Committee meetings which took place during the period November 2003 to December 2004 do not indicate that the 2004-05 GRR Business Plan and Strategy document was presented at any of these forums. Mr Moore has stated that the content of the Business Plan was orally explained to certain Executive Directors. In any case, the 2004-05 Business Plan did not address the confusion concerning GRR's remit.

  3.14  The confusion concerning GRR's remit led to tension about the role of the first and second lines of defence. With strong communication and relationships between GRR, RRR and the Retail business the lack of clarity as to GRR's remit could have been overcome. As neither of these was present these difficulties were not addressed and were a recurring issue throughout 2004.


  3.15During 2004 Mr Moore was supported by two deputies. The budgeted headcount for GRR was 130 individuals of which approximately 43 were to provide oversight and advisory services. In addition, GRR had access to external resources (advisory firms and contractors) when required, for example for the Advice Checking Team, CBF and SC reviews. No adverse comments regarding the resources available to GRR have been made to us. Parties external to GRR have commented on the high quality of the team recruited into GRR during 2004 and credit Mr Moore with this.

Performance of GRR's oversight function

  3.16  Throughout 2004 and at the time of our review GRR did not have formally agreed the documented operational procedures and standards of practice in place. To an extent this can be attributed to the timing of the changes in leadership and strategic direction of GRR in late 2003/early 2004. The 2005-06 Business Plan recognised that improvements were needed in this area and this is now being addressed. Our consideration of the MEC, CBF and SC reviews has identified a number of issues regarding the process adopted by GRR. These fall into a number of areas as set out below. Notwithstanding the points noted below, comments have been made that Mr Moore made improvements within GRR in the areas of recruitment and development a more challenging review process.

Review identification and scoping

  3.17  GRR split their work between three areas—Business as Usual, Group-Wide Themed and Operational Division themed. However, it is not clear how GRR decided what work was to be undertaken or the priority to be attached to the work. In addition, it is not clear whether GRR undertook a methodical risk analysis to identify areas to be addressed. If this did happen we have not seen any documentation.

  3.18  The nature of Group-Wide and Operating Division themed reviews is not fully explained within the GRR Business Plans. Operating Division themed reviews has the most potential for overlap with the work undertaken by RRR, the Memorandum of Understanding between GRR and RRR does not explain GRR's approach in this area. If the terms of reference and scope of reviews are not agreed in advance it is possible to see how RRR's and divisional management's confusion regarding GRR's remit could arise.

  3.19  The extent to which GRR communicate with RRR and considered RRR's work when planning their work for example on the CRF review is not clear, GRR did not share the terms of reference of their review with all key stakeholders; Jo Dawson (Head of Retail Advisory Sales) says she did not receive a copy, although RRR and some of her direct reports were aware of this review. Mr Moore finds it extraordinary that Ms Dawson was not aware of this review.

  3.20  Similarly with respect to the SC review, it was not communicated clearly how the GRR work was to interact with, or build on, the work RRR had already commenced in this area. The lack of transparency concerning Operating Division themed reviews and in some cases product specific reviews (eg the CBF review) has had a detrimental effect on the trust and respect between GRR and RRR.


  3.21  The general consensus is that the substance of the overall findings and underlying work performed by GRR staff whilst carrying out the three reviews was of an appropriate standard to meet the scope. This is borne out by the nature of the changes between initial and final drafts of the reports, these are mainly factual and editorial and would be expected in such circumstances.

  3.22  Other HBOS departments such as Internal Audit grade their reports and recommendations. The Retail Businesses' management assumed this style would be adopted by GRR. There are arguments both ways as to whether reports should be graded. GRR do not grade their reports. This left the reports open to misinterpretation by the divisions as to the importance of the issues and potential impact on the business. There was criticism about the style of the early drafts of the reports. This was accepted as a contributing factor to the tension over the CBF report by members of the GRR team.

  3.23  Mr Moore considers that the views expressed in the final reports or board papers for the MEC, CBF and SC reviews were diluted compared to the views in earlier drafts. We do not believe that the findings in the final reports prepared in respect of the MEC, FBF and SC reviews differed significantly from the conclusions reached in earlier drafts, albeit there were some editorial change. This has been confirmed by the interviewees involved in these reviews.

  3.24  Mr Moor stated that when drafting the MEC report, he allowed the criticism of the way Retail management had been running the mortgage endowment complaints to be "softened" by the Retail division. He expressed concern that as a result of the changes to the report the confidence of the FSA in him may have been damaged. Senior management thought he had been too hard on himself. As stated above the findings in the final report did not differ significantly from those in earlier drafts.

  3.25  The FSA's findings from its own review of the MEC differed to those GRR, and initially the FSA reacted adversely. The main difference between the findings of the GRR review and the FSA's on-site review in January 2004 centred around the GRR conclusion that the rejection rate of complaints was justifiable. The FSA concluded from its own file review (based on a different sample) that there were grounds to believe that a significantly higher percentage of rejected complaints should have been upheld. In addition the FSA considered the GRR review concentrated on the process of complaints handling the FSA threatened Enforcement action if the matter was not addressed by HBOS. Senior management have expressed the view that Mr Moore felt "scarred" by the FSA response to the MEC work undertaken by GRR; this might be a relevant factor when considering Mr Moore's concerns regarding the CBF and CR reports.

  3.26  James Davies and Andy Sheppard were involved in producing the five drafts of the CBF report. Whilst Mike Ellis prepared a paper for the GMB summarising the detailed Sales Culture report. Paul Moore and James Davies who was leading the SCR attended a meeting with Mr Ellis to confirm the wording of the GMB paper.

  3.27  It is standard practice across the industry to agree the initial findings/draft reports for factual accuracy and context prior to presenting the findings to the business management. In the case of the CBF review these accepted protocols were not followed when Mr Moore escalated issues to the Divisional Chief Executive, Group Audit Committee and Group Chief Executive prior to findings being presented to or discussed with RRR or the Business. These briefings damaged GRR's relationship with RRR and the business, particularly with Ms Dawson, and created a tense atmosphere which increased the difficulty to agreeing the review's findings.

Senior management response to issues

  3.28  Following all three reviews, action plans were drawn up and have been, or are in the process of being actively tracked by the business to address the issues raised and recommendations made by GRR. In addition, the recommendations included in Appendix 1 to the PWC report are being actioned by HBOS. We have not seen any evidence to suggest that senior management have not responded in an appropriate manner, that actions are not being addressed or that the Board and or FSA have not been kept appropriately informed of the firm's progress. With respect to the three reviews:

    —  Andy Hornby (Head of Retail Division) was actively involved in the resolution and tracking of the issues identified during the course of GRR's review of MEC and the FSA;'s subsequent review. Executive oversight of issues arising from Mortgage Endowment Complaints review is exercised through the Mortgage Endowment Steering Group;

    —  the agreed actions arising out of the CBF review, including a detailed customer contact exercise to confirm customer understanding of this product, have been carried out in accordance with the action plan. Jo Dawson as head of Advisory Sales provided a progress report to the Retail Board and the FSA in September 2004; and

    —  the issues identified and actions to address the issues identified during the SCR are covered within a Category 1 Project which reports regularly into the Board and is actively sponsored by Andy Hornby as Chief Executive of the Retail Division.


  3.29  Paragraph 31 of the Outline of Case refers to an interview Mr Moore held with Jack Cullen (Head of Risk Services, Retail) in May 2004 to discuss the culture on the Retail Sales division. Mr Moore attached a copy of the notes of interview to the Outline of Case. These notes were not agreed with Mr Cullen and were not included on the HBOS files. There is a difference in opinion regarding whether the notes are an accurate reflection of the discussion held. Mr Cullen has stated that some of the comments in the notes are taken out of context and may convey a misleading impression of his views. Rather than focus on these differences, what is important is that the context of the discussion was taken into account when preparing the GRR report and recommendations; and HBOS have implemented a Category 1 project to address the issues arising from the review. Hence, we consider that the concerns raised in the noted (sic) are being addressed.


Background to the Group Risk Director ("GRD") role

  4.1  In autumn 2003 Mike Ellis informed James Crosby that he wished to retire from HBOS. This acted as a catalyst for Mr Crosby to think about his senior executive responsibilities. He decided to split the Group Risk and Finance role. HBOS secured Mark Tucker for the role of Group Finance Director quicker than anticipated in April 2004. This left the position of GRD open to be filled.

Process for identification and assessment of candidates for the GRD role

  4.2  In March 2004 the Group Management Board ("GMB") undertook their annual talent review of level 7 and 8 executives. This review identifies candidates that are likely to emerge as GMB members in the near future. Mr Crosby and Jackie Moore (Head of Executive and Organisational Development) held informal discussions to see if any individuals highlighted in the talent review were suitable for the GRD position. Ms Dawson, David Walkden, Dan Watkins and David Fisher were identified as such candidates. In addition Dr Andrew Smith was identified as someone with the right technical skills and knowledge. Mr Moore was not identified as a candidate.

  4.3  Mr Crosby and Ms Moore decided to adopt a structured process using an external provider to identify the competencies required for the role and assess potential internal and external candidates.

  4.4  Between April and May 2004 Mr Crosby discussed the GRD role with the senior team and articulated to them that he had considered Ms Dawson to be his strongest candidate, although this view was not shared by all members of senior management at the time. On 18 May, Mr Crosby informed the Nomination Committee of the need to appoint a GRD. It should be noted that the PWC S166 review was being performed at this time. The results of this review would potentially influence the new job specification and skills profile required.

  4.5  In July 2004 Egon Zohnder International ("EZI") were appointed as headhunters. They held discussions with some senior executives and non-Executive Directors to identify the requirements and competencies for the role. During these discussions EZI sought suggestions for suitable candidates. In parallel Mr Crosby held discussions with the five internal candidates. Mr Crosby also spoke to Mr Moore for his views although it appears to be mutually agreed that Mr Moore was not a candidate.

  4.6  A role competency was produced and during August and September 2004 Ms Dawson and other internal candidates were interviewed by EZI for this position. At this point the five external candidates were excluded. Four external candidates were considered not to be as compelling as the internal candidates when consideration of the cost of the recruit or the time candidates would take to get up to speed with the HBOS were taken into account. A fifth candidate was excluded as he was deemed to be conflicted from the position.

  4.7  EZI confirmed the competencies required for the role in a telephone call with Mr Crosby in mid September. After undertaking screening interviews EZI then produced a report mapping the candidates onto a competency matrix. The matrix was supported by a one-page summary for each individual. These summaries provided: a synopsis of the individual's career; EZI's analysis of their capability for the role; EZI's assessment of their competencies against the role target; and, an assessment of their potential. Ms Dawson was identified as the clear lead candidate with the EZI report highlighting that she was a high achiever and supremely capable intellectually. It also noted some development needs concerning her abrasiveness and inflexibility noting that she lacked warmth. In conclusion it noted that no one at HBOS would be surprised to see her appointed to this role.

  4.8  Ms Moore and Mr Crosby discussed the EZI findings and concluded that Ms Dawson was the lead candidate. Ultimately it is Mr Crosby who made the final decision to appoint Ms Dawson as GRD. The Nominations Committee were kept informed. It was decided that this position would be announced as part of the larger reshuffle which was announced in November 2004. In our view the process for the identification and assessment of candidates for the GRD position and appointment of Ms Dawson appears appropriate.

Appointment of Ms Dawson

  4.9  At paragraph 3, which is further explained at paragraphs 53 to 56, the Outline of Case raises issues concerning whether Ms Dawson should undertake the GRD role. We consider below each of the issues raised:

(a)  Lack of technical skills

  4.10  KPMG does not believe that the GRD necessarily needs to have strong technical competencies in the wide range of HBOS generic risk categories (eg Market, Credit Insurance, Operations, regulatory, Liquidity, Interest Rates), especially if they are supported by individuals with the appropriate technical skills. This is consistent with Chapter 10 of the FSA's Supervision Manual concerning Approved Persons which does not prescribe the particular skills an individual undertaking a CF10 role is required to possess. It is key that the GRD recognises that technical skills are important and is willing to either be briefed or have an ability/willingness to educate themselves. They must recognise that the rules and principles need to be adopted in spirit and be able to convince management that a strict interpretation of the FSA's Rules is not sufficient. Ms Dawson recognises that she will need technical assistance, either from external or internal advisers.

  4.11  A number of individual Executives and non-Executives have also expressed the view that the GRR needs strong communication and relationship skills supported by the technical expertise of direct reports.

(b)  Ms Dawson's attitude

  4.12  The Outline of Case expresses concern regarding Jo Dawson's attitude to controlling risk and eliminating activities that run counter to the regulatory regime. In particular paragraph 28 states "Ms Dawson and her team made clear their resistance to responding positively and appropriately to matters of non-compliance raised by GRR".

  4.13  As stated at paragraph 3.28, action plans were drawn up and actively tracked by the business in respect of all three reviews. Ms Dawson was centrally involved in the CBF follow-up during summer 2004. We have not seen any evidence to suggest that senior management have not responded in an appropriate manner, that actions are not being addressed or that the Board and/or FSA have not been kept appropriately informed of the firm's progress. Our assessment of the evidence in the CBF follow-up action does not support the assertion made by Mr Moore.

(c)  threatening behaviour

  4.14  Paragraph 54 of the Outline of Case refers to threats made by Ms Dawson to Mr Moore at a meeting on 30 July. It is clear that Ms Dawson was frustrated by Mr Moore's escalation of issues arising from the CBF review to the Divisional Chief Executive. Group Audit Committee and Group Chief Executive prior to discussing the findings with the business. These frustrations were apparent in meetings held on 24 March, 26 May and the July Meeting referred to by Mr Moore. Ms Dawson accepts that her language, on occasion, is robust and she does not preclude the possibility that she swore at Mr Moore.

  4.15  Ms Dawson raised her concerns more formally in two particular emails dated 28 May and 4 June. It is not clear why Ms Dawson waited until the end of May and early June ie after GRR (21 April) and FSA reports (28 May) had been issued to express her concerns in this way.

  4.16  Aspects of Ms Dawson's character were highlighted by EZI when the appointment decision was being made. In their assessment of Ms Dawson they stated: "Jo's absolute drive to succeed can make her demanding to work for and her tendency to be somewhat inflexible and a bit abrasive at times can inhibit her ability to build deep relationships across businesses. She has something of a track record of confrontations with HBOS and is not a natural diplomat".

  4.17  It is generally recognised by the senior Executives that certain Ms Dawson's behaviour concerning the CBF was not appropriate. The escalation of matters to the Division Chief Executive Group Audit Committee and Group Chief Executive before engaging with her would be grounds for her to become infuriated. However, it is senior management's view, including the Group Chief Executive, that Ms Dawson has the ability, as summarised in EZI's analysis, to be effective in her new role.

  4.18  We do not believe that the evidence reviewed suggests that Ms Dawson is not fit and proper to undertake the GRD role.


  5.1  In this section we used the word redundancy. However we make no comment on the legal distinction between the words redundancy and dismissal. This is a legal issue. We do not believe that use of the term redundancy as opposed to dismissal makes any difference to a consideration of the regulatory compliance issues or the process followed.

  5.2  At paragraph 4, which is further explained in paragraphs 46 to 52, the Outline of Case raises issues relating to the dismissal of Mr Moore. These paragraphs included aspects of employment law, which are outside the scope of our review.

HBOS' redundancy policy

  5.3  The HBOS Job Security Agreement dated 28 January 2003 which was extended with Union agreement on 20 November 2003 to cover the year commending 1 January 2004 establishes the principles to be applied when dealing with potential redundancy issues. This document states "This Agreement does not apply to colleagues above Level 5 or those colleagues working beyond their Normal Retirement Age ...".

  5.4  Consistent with the Job Security Agreement, HBOS have confirmed that there are no defined processes for making positions at above Level 5 redundant. To put this in context, during the period November 2003 to December 2004 18 individuals at level 7 or 8 left HBOS at the Company's request and compromise agreements were concluded with all these individuals. There are approximately 150 people at level 7 or 8.

Factors leading to the redundancy of the Head of GRR position

Creation of the GRD position

  5.5  During the process undertaken to define the GRD role consideration was given to the organisational structure that should be in place below that position. It was felt that Mr Moore could not continue as Head of GRR for two reasons which were explained to him in a meeting with the Group Chief Executive on 9 November 2004:

    —  the new organisational structure incorporating the role of GRD would not allow Mr Moore to undertake the role he wanted; and

    —  his influencing and relationships skills did not enable him to inspire sufficient confidence in the key stakeholders.

  5.6  Whilst Ms Dawson had expressed a wish to continue to work with Mr Moore in her role as GRD, concerns were expressed elsewhere that this could not be possible due to previous difficulties in the relationship. Reference was made to occasions during 2004 when Mr Moore had stated that he could not work with Ms Dawson.

Mr Moore's performance

  5.7  Numerous negative comments have been made regarding Mr Moore's performance in the role of Head of GRR. Whilst his technical abilities were general recognised as strong consistent reference has been made to Mr Moore:

    —  not inspiring confidence in GRR's stakeholders;

    —  not having sufficiently strong influencing and relationship skills;

    —  being overly verbose and full of self-importance;

    —  not being on top of the detail; and

    —  over-stating matters in an overly dramatic and theatrical way

  5.8  In particular his behaviour on the following occasions was highlighted:

    —  16 September 2003 HD Risk control committee—Mr Moore criticised the way the meeting was chaired. A number of individuals considered this behaviour to be inappropriate;

    —  26 May 2004 Retail Risk Control Committee—Mr Moore was perceived as lecturing the committee in a patronising manner and offended individuals present with the style; and

    —  8 June 2004 Group Audit committees meeting—Mr Moore expressed strong views in an overly aggressive manner, he was emotion and not reasoned, measured or coherent. His behaviour was described in different ways ranging from prickly to ranting to extra-ordinary to outrageous. Mr Moore's behaviour at this meeting was subject to a private meeting of the Audit committee on 23 July 2004.

  5.9  In addition, reference was made to a number of private meetings that Mr Moore held with the non-Executives in which it was felt that his approach, his behaviour and the manner in which he escalated issues was inappropriate. In contrast he did not have a private meeting with the Chairman of the Audit committee until late 2004, although requests were made by the Chairman of the Audit Committee for such a meeting to be scheduled.

Loss of confidence

  5.10  It is clear that senior executives and non-executive directors interviewed lost confidence in Mr Moore over a period of time and for different reasons. Some individuals expressed surprise that Mr Moore was appointed Head of GRR in 2003.

Decision to make Mr Moore redundant

  5.11  Around October 2004 was decided that Mr Moore was to be made redundant. He was informed of this decision on 5 November 2004.


Initial conclusions

  6.1  During 2004 Mr Moore strengthened the GRR function through the recruitment of strong individuals and by developing more of a team spirit within the GRR function. The 2005-06 Business Plan whilst still demonstrating areas for improvement did build on the 2004-05 Business Plan and indicates that the GRR function was refining the role of oversight. However, the confusion surrounding GRR's remit and the interaction between GRR, RRR and the Retail Business during 2004 were not dealt with.

  6.2  With strong communication and relationships between GRR. RRR and the Retail business the lack of clarity as to GRR's remit could have been overcome. As neither of these was present these difficulties were not addressed and were a recurring issue throughout 2004. Whilst not specifically mentioned in the MAP, we believe that the opportunity to deal with these issues would naturally fall to the Head of GRR who could have taken steps to improve the clarity of GRR's remit and its interaction with other teams. It is apparent that relationships between GRR and its stakeholders as described in Section 2 deteriorated during 2004. It is clear that the relationship between Mr Moore and Ms Dawson was difficult for some time.

  6.3  We consider that the structure and reporting lines of GRR are appropriate. As noted in Section 3, throughout 2004 and at the time of our review GRR did not have formally agreed and documented operational procedures and standards of practice in place. This matter is being addressed.

  6.4  We consider that the process adopted for the identification and assessment of candidates for the GRD position and appointment of Ms Dawson to be appropriate. It is clear from EZI and Ms Dawson's own self assessment that she is a robust character. The quality of her relationships will be a critical success factor in her new role. However, we do not believe that the evidence reviewed suggests that Ms Dawson is not fit and proper to undertake the GRD role.

  6.5  There are no defined processes relating to the redundancy of positions above level 5 ie the Head of GRR role at Level 8. We set out the facts leading to the redundancy of this role in Section 6.

Further conclusions

  6.6  You subsequently asked us to consider whether the way in which the CBF, MEC and SCR reviews were approached, the reaction to them and the follow up response are indicative of a Group that takes its regulatory responsibilities seriously. It is inevitable that the Group, because of its size and diversity will continue to have ongoing regulatory issues that will need to be actively addressed. However, on the basis of the limited work we have done (as set out in the preceding sections of the report) to meet our original scope, the evidence suggests that the Group does understand, accept and take its regulatory responsibilities seriously. This is supported by the findings of PWC's Skilled Persons report.

  6.7  The redundancy of any approved person in a senior position, such as that of Head of GRR, will be of concern to the FSA as a matter of course. Their interest in the outcome of this project supports this view. On the basis of the work we have done we believe that the quality of Mr Moore's relationships with the key stakeholders, as set out in Section 2, was a key factor in him being asked to leave the Group. We have seen no evidence to suggest that Mr Moore's redundancy was in response to him performing his job too well, as suggested at paragraph 5 of the Outline of Case. The FSA will form their own judgement based on your discussions with them. However, in our view, we believe that it is likely that if the FSA have any residual on-going concerns arising from the issues set out in the Outline of Case they will deal with them as part of their on-going close and continuous supervision.



Non-executive Directors
Individual interviewed Date
Sir Ron Garrick28 January 2006
Coline McConville7 February 2005
Tony Hobson15 February 2005
Charles Dunstone16 February 2005
Kate Nealon16 February 2005
Louis Sherwood16 February 2005
John Maclean21 February 2005

Executive Directors
Individual interviewedDate(s)
Mike Ellis20 January 2005 & 22 February 2005
Phil Hodkinson28 January 2005
James Crosby14 February 2005
Mark Tucker14 February 2005
Andy Hornby15 February 2005

Individual interviewedDate(s)
Paul Moore19 January 2005 & 18 February 2005
James Davies25 January 2005 & 18 February 2005
Tony Brian26 January 2005
Susannah Hammond3 February 2005
Andy Sheppard (contractor)9 February 2005
Andy Gordon (contractor)11 February 2005
Richard Mais (contractor)18 February 2005

Other HBOS
Individual interviewedDate(s)
David Walkden3 February 2005
Jack Cullen3 February 2005
Stephen Millington3 February 2005
Jo Dawson9 February 2005
David Fryatt10 February 2005
Jackie Moore14 February 2005
Andrew Smith24 February 2005

Other External
Individual interviewedDate(s)
Kirstie Caneparo24 January 2005 & 11 February 2005
John Elacott8 February 2005
Guy Bainbridge14 February 2005



Outline of Case and support documentation (Paul Moore Dossier)

Management Response

    —  Mike Ellis's response to case outlined by Paul Moore.

    —  Emails between PRM and Mike Ellis regarding CBF supervision visit and response to GRR review of CBF.

    —  Emails between PRM and Jo Dawson regarding GRR review of CBF.

    —  Emails between PRM, JaD and Mike Ellis regarding chronology of events surrounding CBF review—including schedule setting out CBF chronology.

    —  Emails between PRM, JaD, AH and Mike Ellis regarding rewrites of GRR Report on findings arising out of review of the retail sales culture and systems and control.

Minutes of Committee Meetings during 2004

    —  Minutes of the Meetings of the Directors from 25 November 2003 to 23 November 2004.

    —  Minutes of the Audit Committee meetings from 9 December 2003 to 7 December 2004 and 8 June 2005.

    —  Minutes of the Audit Committee Private Sessions from 9 December 2003 to 11 October 2004.

    —  Minutes of Business Banking Risk Control Committee meetings: 25 November 2003 and 27 January 2004.

    —  Minutes of Corporate Banking Risk Control Committee meetings from 18 November 2003 to 23 November 2004.

    —  Minutes of the Group Management Board meetings from 17 November 2003 to 21 December 2004.

    —  Minutes of International Operations Risk Control Committee meetings: 22 June 2004 and 26 October 2004.

    —  Minutes of IID Risk Control Committee meetings from 20 November 2003 to 3 November 2004.

    —  Minutes of the Nomination Committee meetings from 28 October 2003 to 26 October 2004.

    —  Minutes of Retail Risk Control Committee meetings from 21 November 2003 to 2 December 2004.

    —  Minutes of Treasury Risk Control Committee meetings from 13 November 2003 to 10 November 2004.

    —  Minutes of Group Operational & Regulatory Risk Committee meetings from 11 December 2003 to 7 October 2004.

    —  Minutes of Retail Board meetings from 20 November 2003 to 22 December 2004.

    —  Monthly Risk Reports within the Management Information Pack for "Blue Book", from November 2003 to November 2004.

GRR papers submitted to Risk & Governance Committees during 2004

    —  GRR papers submitted to the Group Management Board meetings from 17 November 2003 to 21 December 2004.

    —  GRR papers and Quarterly reports submitted to Audit Committee meetings from 9 December 2003 to 7 December 2004.

    —  GRR papers submitted to Retail Risk Control Committees from 5 February 2004 to 23 September 2004.

    —  GRR papers submitted to Treasury Risk Control Committees from 19 February 2004 to 19 July 2004.

    —  GRR papers submitted to Business Banking risk Control Committee 27 January 2004.

    —  GRR papers submitted to Corporate Banking Risk Control Committee 27 January 2004, 21 September 2004, 23 November 2004.

    —  GRR papers submitted to International Operations Banking Risk Control Committee 26 October 2004.

    —  GRR papers submitted to IID Risk Control Committee meetings: from 13 November 2003 to 3-4 February 2004, 15 June 2004, 3 November 2004.

    —  Reports to Group Operational and Regulatory Risk Committee (GORRC).

GRR Structure and Organisation

    —  Copy of document prepared by Paul summarising his view of the "key achievements" of GRR in 2004: "GRR working with their stakeholders to become A New Standard in Regulatory Risk Management" for discussion with Mike Ellis—2 December 2004.

    —  Draft Memorandum of Understanding between Group Regulatory Risk & Retail Division Regulatory Risk.

    —  Meeting Notes of One-on-Ones between Stephan Millington and Susannah Hammond.

    —  CVs for: Paul Moore, Tony Brian, Susannah Hammond, James Davies, David Walkden, and Dan Watkins.

    —  GRR Business Plans for 2004-2005: Draft presented to GAC 09/12/2003—Final version—2005-2006.

    —  GRR Team Structure Charts: 31/03/04, 02/08/04, 1/11/04, 01/02/05.

    —  GRR Retail Plans for 2004 & 2005 and retail division regulatory risk oversight plan for 2004 (draft).

Governance Framework

    —  Overview of HBOS Plc Corporate Governance—internal structure and governance arrangements pre and post merger and three lines of defence model.

    —  Revised Overview of Corporate Governance—following internal restructuring on retirement of Divisional Chief Executive responsible for Treasury Division.

    —  Board Control Manual—includes terms of reference for Audit Committee: Risk Control Committees and various Executive Risk Committees.

    —  Retail Board Control Manual—February 2003 and November 2004 version.

    —  Retail Division Governance framework.

    —  Retail Regulatory Risk structure chart.

    —  2004 AGM Welcome Pack which includes a short biography of HBOS Board members.

    —  11 November email re Senior appointments at HBOS attaching three announcements:

    —  An email to the HBOS Executive explaining their new role.

    —  An email to "Insiders" which sets out all aspects of the announcement.

    —  The "HBOS Today" edition which communicates the changes to 65,000 colleagues across HBOS.

Documents related to s166 review of Risk Management

    —  PWC's s166 Report of Risk Management as at 30 April 2004.

    —  Table laying out s166 recommendations and management response.

    —  S166 Correspondence:

    1.  Email from the FSA to Tony Brian re s166 report 15.02.04.

    2.  Email and document re Draft Scoping document 8.02.04.

    3.  Meeting notes between HBOS and FSA from 16.04.04.

    4.  Formal requirement notice and final scope for report 28.04.04.

    5.  Trilateral meeting to review report 23.08.04.

    6.  Letter from the FSA to Mike Ellis re s166 report 23.09.04.

    —  Status of agreed actions arising from PWC s166 review:

    —  Paper to the Audit Committee 7 December.

    —  Recommendations and management response.

    —  Group Risk Committee draft ToR.

    —  Table of Heads of Risk in each division.

    —  GRR report independence of LRMS from the Business Areas.

    —  Protocols on co-ordination between GIA and GRR.

FSA Arrow letters and Risk Mitigation Programmes (RMP)

    —  Risk Mitigation Programmes (RMP letters):

    —  FSA correspondence re Risk Assessment from Kirstie Caneparo dated 13 January 2004 and response to FSA from James Crosby dated 11 February 2004.

    —  FSA correspondence re Risk Assessment—HBOS Retail Division from Kirstie Caneparo dated 1 December 2003.

    —  FSA correspondence re Arrow Risk Assessment: Letter from Kirstie Caneparo dated 21 December 2004 and Group Response to this dated 31 January 2005.

    —  FSA letter of 6/11/03 that prompted the GRR review of mortgage endowment complaints.

Mortgage Endowments

    —  The RRR report (August 2003) into Mortgage Endowment complaints and its terms of reference.

    —  Various versions of the terms of reference (Nov/Dec 2003) for the GRR review of Mortgage Endowment complaints.

    —  3 drafts of the GRR review (dated 15/12; 17/12; and 19/12—the latter being the version sent to the FSA).

    —  "Close out" letter dated 4/05/04 from the FSA to Andy Hornby..

Corporate Bond Fund (CBF)

    —  GRR CBF Reports (Drafts 1 to 5)..

    —  GRR CBF TOR.

    —  GRR CBF—summary of 35 samples..

    —  Corporate Bond Fund Actions.

    —  FSA Corporate Bond Fund Review (27 May 05) and meeting note (21 Apr 04).

    —  FSA meeting notes (13 September 2004).

    —  Paul Moore (HBOS) Chronology.

    —  Audit Committee Minutes (inc 9 March 2004, 8 June 2005).

    —  CBF Sales Paper (6 September 2004).

    —  Alarm over Bond Sales (Daily Mail Article—November 2003).

    —  Lloyds TSB fine (24 September 2003).

    —  Risk Assessment following the Lloyds TSB fine by FSA.

    —  FSA action against Lloyds TSB—implications for HBOS (Paul Jackson).

    —  CAG—Corporate Bond Sales (Tom Woolgrove).

    —  CBF Assessment (1 September 2003—Paul Jackson).

    —  Product information on CBF. Guaranteed Reserve Account Halifax Collective Investment Plan.

    —  ACT Report.

    —  Moneybox Investigation.

    —  Numerous internal e-mails within HBOS relating to CBF.

Sales Culture Review

    —  Terms of Reference.

    —  Aide Memoire on initial findings by Paul Moore for discussion with Andy Hornby 11.06.

    —  Emails between Paul Moore, Mike Ellis, Andy Hornby and Jame Davies dated 14.06.04—26.07.04, discussing rewrites of the draft SCR report.

    —  Selected notes of branch visits and focus groups output—04.07.04.

    —  SCR/s166 Management Programme pack.

    —  Paul Moore's note on meeting with Jack Cullen.

    —  Jack Cullen's response to Paul Moore's note.

    —  E&Y review of Retail Internal Controls (March).

    —  Chronology of events of SCR by Richard Mais.

    —  Reports:.

    —  First Draft—04.07.04.

    —  Second Draft—13.07.04.

    —  Third Draft—20.07.04.

    —  Final Report—23.07.04.

    —  Main Board Report by Mike Ellis (GMB Paper).

    —  Branch Visit Findings—Summary by A Gordon (Oxford Circus, 27 May 2004).

    —  Branch Visit Findings—Summary by A Gordon (London BOSIS, 9 June 2004).

    —  Branch Visit Findings—Summary by A Clarke (Skipton, 27 May 2004.

    —  Branch Visit Findings—Summary by T Townson (Worcester Park, South London, 28 May 2004).

    —  Focus Group Findings—Summary (North Region Branch Colleagues, 7 June 2004).

    —  Various HBOS—GRR Review Interview Notes. Interviewees: Jo Dawson, Ray Milne, Heather Cutts, Paul Stanley, Colin Turner, Paul Jackson..

    —  HBOS Sales Culture and Systems Controls Review Document Log.

    —  Diary view of interviews.

    —  Retail Division—Sales Culture and Systems and Controls Review Action Plan v 3.

    —  Retail Division—Sales Culture and Systems and Controls Review Terms of Reference (Draft).

    —  Sales Culture & Risk Management Project status report identifying key issues, dependencies and milestones.

    —  Retail sale culture and Risk management operational review pack prepared for a meeting of the Programme Steering Committee on 31.01.05 and minutes of the operational review/steering group meeting on 31.01.05.

HR documents/HBOS Appointment Policy

    —  HBOS Job Security Agreement 2003 & 2004.

    —  HBOS Disciplinary Policy.

    —  HBOS Recruitment and Selection Policy.

    —  HBOS Performance Improvement Policy.

    —  HBOS HR Standards dated January 2004.

    —  HBOS Executive & Organisational Development—Executive Framework 2004.

    —  The HBOS approach to Maximising Returns on External Coaching.

    —  HBOS Level 7 & 8 Succession Planning Procedure.

    —  HBOS plc Annual Report & Accounts 2003 extract on role of the Nominations Committee.

    —  HBOS Nominations Committee Terms of Reference.

    —  Executive Summary. Responsibilities of the HBOS Chief Executive.

    —  Confidential Executive Profile—Paul Moore.

    —  Executive Performance Management—IID Paul Moore dated 8 March 2004.

    —  Paul Moore: Highlights of his 360 feedback—2004 (Prepared by Jackie Moore).

    —  Executive Orientation—Initial Development Discussion—Paul Moore (2004).

    —  Paul Moore HBOS GRR 360 Feedback 2004—General Findings.

    —  Extracts from Paul Moore's personnel file.

    —  E-mail from Irene Brownlee to Jackie Moore dated 23 July 2004 re Paul Moore.

    —  E-mail from Irene Brownlee to Jackie Moore dated 1 September 2004 re Paul Moore.

    —  E-mail from Paul Moore to Jackie Moore dated 1 September 2004 re meeting with Paul Moore.

    —  E-mail from Paul Moore to Jackie Moore dated 12 October 2004 re Susannah Hammond.

    —  E-mail from Paul Moore to Jackie Moore dated 13 October 2004 re Susannah Hammond.

    —  Confidential Executive Profile—Jo Dawson.

    —  Appraisal—2003 Jo Dawson.

    —  Executive & Organisational Development report for Jo Dawson dated March 2003.

    —  EZI presentation on Group Risk Director dated 4 August 2004.

    —  EZI presentation update on Head of Group risk dated 15 September 2004.

    —  File note of conversation between Jonathan Skan of EZI and Tony Hobson re Group Head of Risk role.

    —  Email from Jo Dawson to Jackie Moore re appointment to see Jonathan Skan on 1 September 2004.

    —  Email from James Crosby to Dennis Stevenson and Sir Ron Garrick re reorganisation and likelihood of Paul Moore's departure dated 8 November 2004.

    —  Email from James Crosby to HBOS non-executives re Senior Appointments at HBOS dated 11 November 2004.

    —  Internal memorandum from James Crosby on Organisation announcement dated 11 November 2004.

Other documents reviewed

    —  Copy of notes which Andy Hornby and Phil Hodkinson used to communicate the approach to Regulatory Risk Management prior to Paul taking over as Head of Regulatory Risk Management:

    —  Internal Memorandum dated 5 April 2002.

    —  Paper on Risk Management Structures within the HBOS Insurance & Investment Division.

    —  Management Accountability Profiles including those for Tony Brian, James Corcoran, James Crosby, Jack Cullen, James Davies, Jo Dawson, Mike Ellis, Phil Hodkinson, Andy Hornby, Paul Moore, Stephen Millington and David Walkden.

    —  D Fryatt Paper to June Audit Committee—"Key questions for Board Audit Committee".

    —  E-mails from Charles Dunstone attaching details of RRCC minutes of 26 May and amendments thereto.

    —  E-mail from Dennis Stevenson to Charles Dunstone (forwarded by CD) acknowledging CD's feedback from meeting with PM in June.

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