The Financial Services Authority will today hold its hands up and admit serious shortcomings in the way it handled Royal Bank of Scotland and the banking system in the run-up to the multi-billion pound taxpayer-funded bail-out of the Edinburgh-based lender.
The regulator will this morning publish its long-awaited report into the circumstances that led to RBS going cap in hand to the taxpayer in 2008.
It will confess that it failed to spot the pressures building up in the banking system and did not understand the pitfalls of the reliance on the wholesale money markets. The watchdog will accept that it missed the implications for a bank like RBS when funding dried up, as it did during the credit crunch.
However, while the FSA will admit gaps in its own role and accept that the light-touch regulatory approach was ill-conceived, it will conclude that the real blame for the bank's woes lies squarely at the door of management.
It was RBS's reviled chief executive, Sir Fred Goodwin, and the company's non-executive directors who gave the green light to the disastrous hostile takeover of ABN Amro and oversaw the other strategic and operational mistakes that ultimately led to the taxpayer having to inject £45 billion into the bank to keep it afloat. It was Sir Fred who led RBS's charge to take over ABN with a cash bid, in a consortium with Spain's Banco Santander and Belgian bank Fortis, that saw off a rival all-share takeover proposal from Barclays.
The takeover saddled RBS with a heavy load of toxic assets that plunged it into crisis as the credit crunch destabilised the banking system.
The report is being made public in the wake of pressure from Parliament's Treasury Select Committee. It intervened by securing the appointment of City grandees Sir David Walker and Bill Knight to conduct an independent review of the findings which could yet lead to an overhaul of the way large takeovers involving big financial companies are policed.
Ahead of the release, lawyers acting for those likely to be found at fault by the report are believed to have been battling to stall or prevent publication or, failing that, to secure substantial redactions from the document.
The findings are set to influence the debate surrounding the reshaping of the regulatory architecture as the FSA is dismantled. Last week, the FSA's chief executive, Hector Sants, admitted that, three years on from the worst of the banking crisis, the financial system remains in need of further reform.