An adviser to Gordon Brown who sacked a whistleblower who warned that he was leading HBOS “to the precipice” was forced to quit as a City regulator yesterday.

Sir James Crosby, the bank's former chief executive, resigned as deputy chairman of the Financial Services Authority after Paul Moore claimed that he was dismissed as head of risk after warning that the bank was “going too fast”.

Mr Moore had told the Treasury Select Committee that he was sacked after warning HBOS chiefs that they were risking the bank's finances.

Sir James, who was the FSA deputy chief for more than five years, said that Mr Moore's original claims had been investigated independently and had “no substance”. But he said that he was worried about becoming a “distraction” to the FSA and felt that the “right course of action” was to step down.

It emerged yesterday that the accountants KPMG - the “independent” experts who reportedly cleared HBOS and Sir James of serious failings in corporate governance - have received more than £100 million in fees from the troubled bank in the past eight years. The money was for auditing, tax advice, information technology work and compliance advice.

It appeared that there had been no attempt by Gordon Brown or Alistair Darling to save Sir James, even though both have commissioned him to write key reports in recent years, one on identity cards and the other on mortgage finance.

Mr Brown told the Commons that Sir James was “no longer an adviser to the Government” after telling MPs that he had resigned to deal with the allegations against him and was right to do so. The announcement that Sir James was quitting came just 30 minutes before Mr Brown appeared in the Commons, although No 10 said that the timing was Sir James's.

But suspicions were growing last night that Mr Brown would have been less inclined to fight for Sir James after learning more in recent months about his role in drawing up the business model that was eventually to lead HBOS into trouble. Mr Brown told MPs: “It is right that we investigate serious allegations that are made about the banking system.”

David Cameron pressed him to admit that it was “a serious error of judgment” on his part to appoint Sir James to the deputy chairmanship of the FSA.

Vince Cable, the Liberal Democrat Treasury spokesman, accused Mr Brown of having made an “utterly inappropriate” appointment. He said: “It is clear from Paul Moore's evidence that James Crosby was part of the problem, not part of the solution.

“The FSA needs people with experience but not the wrong experience.”

Mr Moore said last night that he was “not interested in the whole blame game”.

He added: “But people should admit when they have done wrong and take the consequences as they come. There was such a headlong rush towards the cliffs that it's difficult to say how anyone could have slowed it down.

“I usually like to explain it as a man in a rowing boat heading straight towards a huge oil tanker.

“I know that he denied the allegations and relied on a supposedly independent report as his defence but I believe an investigation into that report will find the truth of the matter.

“I have detailed evidence corroborating the truth of what I say. The report that they have will not withstand an independent investigation. I was fired, in my opinion, because I raised legitimate concerns about dangerous banking practice.

“I raised challenges with which they were uncomfortable and was sacked, therefore leading the bank on towards the precipice.

“I was certainly not the only one who knew about this - I was just in the most senior position so I became the mouthpiece.”

The closeness of KPMG's relationship with HBOS and the size of the fees - millions of which were earned for non-audit work - are likely to raise questions about the accountancy firm's independence in conducting the highly sensitive investigation. It also had to balance another potential conflict of interest because Mr Moore was a former partner at KPMG

Lord Stevenson of Coddenham told MPs on the Treasury Select Committee on Tuesday that the Financial Services Authority was satisfied with the KPMG report and regarded the matter as closed. He described its investigation as “independent”.

Details of what appeared to be a vicious turf war under Sir James in 2004 were emerging yesterday. Mr Moore was described as “prickly” and “ranting” by members of the HBOS audit committee in the KPMG report and at war with the executive who was to become his successor, Jo Dawson, The Times has learnt.

The FSA said that Mr Moore's original allegations had been fully investigated by KPMG. It said that the report concluded that the changes made by HBOS after the row were appropriate. It added: “We would like to thank [Sir James] for his very significant contribution to the FSA over the past few years.” KPMG said that its report “had a narrow focus on regulatory compliance risk at HBOS and did not examine the bank's overall sales or investment strategy or any other aspects of the bank's operations”.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax