Outlook Something up with Libor, you say? Sorry guv, not my problem, speak to the British Bankers' Association. This, in a nutshell, was the attitude of the Financial Services Authority when the issue was raised with it on 26 separate occasions, and perhaps as many as 74 where there were oblique or indirect references to the problem in FSA communications.
So said an internal audit, the results of which were released yesterday.
The report cleared the FSA of the sort of the systemic supervisory failings that contributed so much to the mess at Northern Rock. But it still painted a very unflattering picture of the way the regulator handled the affair. Once again the organisation appears to have been asleep at the wheel. It is true that there was a lot going on when it became clear that some banks were deliberately low-balling their submissions to the various Libor panels, namely the financial crisis. Which was the cause of the low-balling.
But that's a cop-out. If the police failed to follow up on leads relating to a potential terrorist incident because they were in the middle of a big murder inquiry and a bomb went off as a result they'd be eviscerated, and rightly so.
The question now is whether lessons are being learnt. If one looks back to past failures they clearly haven't been, because the failings have been repeated, again and again and again.
The FSA has produced a succession of these "speak bitterness" self-criticisms where it hangs its head and accepts a kicking from either an internal or external auditor over the way it has handled a foul-up, starting with Equitable Life more than a decade ago and running on through the aforementioned Northern Rock, culminating with Royal Bank of Scotland and now this. There's an HBOS report still to come too, remember, although it's not hard to guess what it will say. Start with the Royal Bank of Scotland report, change the names, lather, rinse, repeat.
On the fact of it, indulging in another reorganisation is a recipe for more of the same. Reorganisation is at the core of the FSA's dysfunction. It was created from the fusion of nine separate regulators, and it's only because Gordon Brown went on to commit far more egregious policy errors that this is, by his standards, seen as a misdemeanour rather than a high crime.
So there are good reasons for being concerned about the Government's plan to split the FSA into two, with conduct issues (such as Libor) going with the Financial Conduct Authority (FCA) and prudential supervision landing with the Bank of England's Prudential Regulation Authority (PRA). It doesn't appear to be the most sensible plan.
But maybe it is exactly the medicine that is needed here. New organisations, new leadership, new culture.
Certainly there are grounds for optimism that the FCA will get this, and oh how it needs it. In Martin Wheatley it has a businesslike CEO who clearly "gets it" and achieved good results in Hong Kong. The PRA? That's more of an open question. The Bank has never been overly fond of accountability. And it's had to produce speak bitterness self-criticisms of its own, specifically in relation to BCCI and Barings, failures every bit as disastrous as those of a more recent vintage.