Welcome to the new Independent website. We hope you enjoy it and we value your feedback. Please contact us here.

UK Politics

Criticism of Sir Fred Goodwin removed from FSA report


A direct criticism of Sir Fred Goodwin in the Financial Services Authority's report on the near-collapse of RBS was removed after a final draft was shown to the former banking boss's lawyers, MPs were told today.

One of the two independent experts appointed by Parliament to review the FSA inquiry revealed that a reference to the RBS chief executive having insufficient experience to run an international bank was excised from the text after complaints from Sir Fred's legal team.

But lawyer Bill Knight told the Commons Treasury Committee that the change was "fair", as the reference amounted to a charge of incompetence for which no evidence was provided in last month's report.

Mr Knight and City grandee Sir David Walker were pressed by the Commons Treasury Committee over whether the FSA report amounted to censure of Sir Fred of the kind which could trigger the withdrawal of his knighthood.

The Honours Forfeiture Committee is currently considering whether to recommend that the Queen should strip Sir Fred of his knighthood. The Whitehall committee normally acts only when recipients of honours are jailed or struck off by professional bodies, but Prime Minister David Cameron last week suggested that the FSA's criticisms alone could justify the move.

Former Morgan Stanley chairman Sir David stressed that the FSA report contained nothing that would expose Sir Fred to legal charges in relation to the fateful 2007 decision to buy ABN Amro, which eventually forced RBS to seek a state bailout.

But he told the Treasury Committee that the FSA's findings amounted to "censure" of Sir Fred.

"There is an accumulation of poor decisions which were, as the report says, poor by the standards of the time, and it is very hard to see how this can't be in your sense be a censure of the chief executive, who was pivotal in virtually every decision that was taken," said Sir David.

However, he declined to say whether this merited referral to the Forfeiture Committee, while Mr Knight said he would be "hesitant" to describe the report as censuring any one individual, as its criticisms were directed at the RBS board as a whole.

Mr Knight confirmed that the FSA report was altered after a final draft was shown to Sir Fred's lawyers, in a process known as "Maxwellisation".

"It is true that the references to Sir Fred were changed following Maxwellisation," he told the Treasury Committee. "But in my judgment, actually, that was a fair change.

"The change was that there was a suggestion that he lacked the experience to run an international bank. The point being made against that was, in truth, an attack on his competence but that there was no evidence of incompetence.

"I felt that that was a fair point ... There was no evidence of lack of competence in terms of experience of running an international bank."