* Crosby will forego 30 percent of pension
* First to ask to give up knighthood since 1919
* Report singled Crosby out as "architect" of HBOS's demise
* MP Mann says move sets example to other failed bankers
By Steve Slater and Matt Scuffham
LONDON, April 9 (Reuters) - James Crosby, former boss offailed British bank HBOS, offered on Tuesday to give up hisknighthood and nearly a third of his pension after beingdenounced by lawmakers for the "colossal failure" that led tohis bank's collapse.
Crosby, whose bank had to be bailed out by taxpayers in2008, effectively volunteered for the same punishment as thatvisited on Fred Goodwin, former head of Royal Bank of Scotland, the other large Scottish bank bailed out after the 2008financial crisis. Goodwin's knighthood was stripped last yearand he gave up part of his pension in 2009.
Crosby becomes the first person to voluntarily give up aknighthood for almost a century. He said 30 percent of his580,000 pound ($887,100) a year pension would either be returnedto shareholders or given to charity.
"In view of what has happened subsequently to HBOS, Ibelieve that it is right that I should now ask the appropriateauthorities to take the necessary steps for its removal," hesaid of his knighthood in a statement on Tuesday.
The government was clearly pleased with the decision. ATreasury spokesman said: "This must be a matter for anindividual's conscience, but the Government believes it is rightthat this decision has been reached."
Crosby, 57, was awarded his knighthood shortly afterstepping down as HBOS chief executive in 2006.
The bank did not collapse until two years after he left it,but a report on Friday by the Parliamentary Commission onBanking Standards (PCBS) put the blame squarely on him and twoother former bosses for the decisions that wrecked it.
The report said Crosby had so badly run the bank that itwould have failed even without the 2008 financial crisis.
John Mann, a Labour lawmaker who has been a critic of Crosbyduring hearings into the banking crisis, welcomed Crosby'sdecision to accept blame and suggested it set an example toother failed bankers.
"At last we have a banker who is prepared to say he got itwrong and wishes to make amends," Mann said.
A knighthood is one of the highest honours an individual inBritain can achieve. A committee recommends the honour to thePrime Minister and then to the Queen.
The last person to give up a knighthood voluntarily wasNobel Prize-winning Bengali writer Rabindranath Tagore, whorenounced his in 1919 in protest against the Amritsar massacrewhen British troops killed hundreds of civilians. Others to havebeen stripped of the honours include Zimbabwe's Robert Mugabe,Romania's Nicolae Ceausescu and former spy Anthony Blunt.
"SET THE COURSE FOR DISASTER"
The PCBS, tasked with finding ways to reform Britain'sbanks, said Crosby had been the "architect of the strategy thatset the course for disaster" at HBOS.
Crosby set the strategy that saw HBOS lose billions ofpounds from reckless lending to companies and a disastrousexpansion into Ireland and Australia. After its bailout by thestate, the bank was acquired by rival Lloyds Banking Group.
Crosby said the report was "very chastening reading" and hewas "deeply sorry for what happened at HBOS and the ensuingconsequences for former colleagues, shareholders, taxpayers andsociety in general".
Crosby's pre-emptive action means he effectively volunteersto share the fate of Goodwin, whose knighthood and lavishpension became a focus of public anger and attracted venomousdenunciations from politicians after the financial meltdown.
Crosby said he would discuss with the pension scheme'strustees how the reduction in his pension would be implementedand if the amount waived should go to support good causes orbenefit shareholders.
Under his proposal, he would still receive 406,000 pounds ayear, to add to almost 8 million pounds he was paid during histenure as HBOS's chief executive.
He said his pension had been built up over his 30 yearcareer, including 12 years at Halifax and HBOS, and was"entirely contractual in nature".
Crosby resigned as an adviser to private equity firmBridgepoint on Friday. He remains a senior independent directorat Compass, the world's biggest catering company, and ischairman of Moneybarn, a small West Sussex company that lends topeople with a bad credit history.
Compass and Moneybarn declined to comment.
After leaving HBOS, Crosby advised former Prime MinisterGordon Brown and became deputy chairman of the FinancialServices Authority (FSA), stepping down from that role inFebruary 2009 after criticism of his role at HBOS.
Lloyds (LLOY)
Compass Group (CPG)