FSA to admit shortcomings in Royal Bank of Scotland oversight
City regulator failed to detect the pressures in the banking system
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Monday 12 December 2011
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.
- 1 British tourists 'murdered' in Thailand: Pair's bloodied bodies found naked on Koh Tao beach
- 2 Vivienne Westwood says 'Yes' to Scottish Independence by declaring: 'I hate England'
- 3 Welcome to Cameroon, where drinking Baileys can lead to imprisonment
- 4 Lego breaks out of the toy box and heads for the gallery
- 5 Vogue under fire for 'Big Booty' article
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
Salmond accused of laughing off national debt with ‘what are they going to do: invade?’ joke
iJobs Money & Business
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
£35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...
Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)
£400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...