Watchdog under fire in attack by MPs

Blistering report hits Lord Turner's hopes of Bank of England Governorship

MPs will today launch a devastating attack on City watchdogs in a move which could wreck Lord Turner's bid to become Governor of the Bank of England.

They accuse the Financial Services Authority under his chairmanship of showing an "astonishing lack of appreciation of the understandable public interest in the failure of Royal Bank of Scotland" following the watchdog's decision to explain its decision not to take any disciplinary action over the bank's failure in a 298-word statement.

In a strongly worded report, the Treasury Select Committee, which was instrumental in forcing the FSA to publish a critique of its oversight of RBS, goes on to lambast "serious flaws in the culture and governance of the regulator".

It angrily criticises what it says was "a fundamental misunderstanding of its duty to account for its actions to the public and Parliament".

And it contains wounding personal criticism of Lord Turner, describing the FSA's critique as "a serious indictment of both the senior management and leadership, and in particular the chairman and chief executive (Hector Sants), in place at the time, and their predecessors, regardless of the prevailing assumptions and political pressures".

That will be a bitter personal blow to Lord Turner, who is currently rated the third favourite to become Governor of the Bank behind Sir John Vickers, the former head of the Office of Fair Trading who led the Government's Independent Commission into Banking, and favourite Paul Tucker, a current deputy governor.

However, Andrew Tyrie, the committee's chairman, did offer him some words of comfort, saying: "Lord Turner has subsequently admitted that he should have grasped at the time the need for more public explanation. He was right to do so.

"His personal commitment to the production and publication of the FSA's report has been valuable."

The MPs' report, nonetheless, calls into question the FSA's assertion that it didn't have a formal basis on which to block RBS's disastrous takeover of and attempt to break up ABN Amro in concert with Spain's Banco Santander and Belgian bank Fortis.

"The argument put forward in the FSA's report, that the absence of a formal statutory basis to intervene was sufficient justification for regulatory inaction, was contradicted by the evidence."

The MPs say that the watchdog could and should have acted. They want the new Prudential Regulation Authority (PRA), which will be run by the Bank of England and oversee banks, to be given an explicit duty to approve or block future deals.

The committee also wants the Parliamentary Commission into Banking Standards to scrutinise the PRA's approach, which will likely happen. Mr Tyrie chairs both. Regulators have been urged to report on how disciplinary processes can be improved to more easily call individuals to account.

The MPs also call for new laws to give them the power to force regulators to review past work when problems occur in future: "We would not, however, expect a properly functioning board to need such prompting from Parliament to conduct such reviews."

The report also takes aim at the Bank of England. While its Court has commissioned three reviews into the Bank's actions during the financial crisis the MPs' report says: "By waiting so long before conducting any review, the Bank of England has diminished its value as a guide to better regulation for the future.

"Any lessons learned as a result of even these limited reviews will also only be available in a very late stage in Parliament's consideration of the Financial Services Bill.

"Incorporation of them into legislation may therefore be more difficult and this is regrettable."

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee