Labour was behind failure to regulate RBS, FSA report says

Pressure from last government was partly responsible for hands-off approach, review claims

Political pressure from senior Labour politicians – including the now Shadow Chancellor Ed Balls – was partly responsible for the failure to regulate the Royal Bank of Scotland in the years leading up to the banking crash, a highly critical report concluded yesterday.

The review by the Financial Services Authority blamed deficiencies in the management and culture at RBS and called for tougher rules to make bankers more accountable. The regulator also admitted it had failed adequately to monitor and challenge the bank – but blamed the previous government for encouraging it to take a hands-off approach. It cited speeches by the former Prime Minister Gordon Brown and the then Shadow Chancellor Ed Balls backing light regulation.

In a speech in 2006 quoted in the report, Mr Balls said: "We must keep the UK's regulatory system at the cutting edge ... At all times we will apply a system of risk-based regulation, without unnecessary administration burdens... Nothing should be done to put at risk a light-touch regulatory regime." The report concludes: "In response to this focus and belief, FSA senior leaders were conscious of the need to reassure political leaders that the supervisory approach being pursued was not heavy-handed."

It added: "If senior leaders of the FSA had proposed, before the first signs of the crisis a supervisory approach which entailed higher capital and liquidity requirements, caps on bank balance-sheet growth, or intensive analysis of asset quality, it is almost certain that their proposals would have been met by complaints the FSA was pursuing a heavy-handed approach which would harm London's competitiveness."

Labour yesterday said the party was clear that they had made mistakes over banking regulation but pointed out that it was not alone in calling for light-touch regulation. It quoted a speech by David Cameron in 2008 in which he referred to Labour's "excessive bureaucratic interventionism" and "too much regulation".

The Business Secretary, Vince Cable, said yesterday he was seeking legal advice about whether any of the directors should face disqualification proceedings. The report shone a light on the poor relations between the FSA and RBS and said its chief executive Sir Fred Goodwin's "assertive" management style was flagged as a potential risk as early as 2003. RBS management was resistant to what they saw as unnecessary FSA interference.

Start your day with The Independent, sign up for daily news emails
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 General

Recruitment Genius: Vehicle Technician

£20000 - £45000 per annum: Recruitment Genius: This long established dealer gr...

Recruitment Genius: Contact Centre Team Manager

£25000 - £30000 per annum: Recruitment Genius: The Company is the UK's leading...

Recruitment Genius: Shunter / HGV Driver

£23172 per annum: Recruitment Genius: One of the leading and fastest growing h...

Recruitment Genius: Property Manager / Estate Manager

£25000 - £35000 per annum: Recruitment Genius: Are you an experienced Resident...

Day In a Page

Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

Greece referendum

Greeks say 'No' to austerity and plunge Europe into crisis
Ten years after the 7/7 terror attacks, is Britain an altered state?

7/7 bombings anniversary

Ten years after the terror attacks, is Britain an altered state?
Beautiful evening dresses are some of the loveliest Donatella has created

Versace haute couture review

Beautiful evening dresses are some of the loveliest Donatella has ever created
No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

No hope and no jobs in Gaza

So the young risk their lives and run for it
Fashion apps: Retailers roll together shopping and social networking for mobile customers

Fashion apps

Retailers roll together shopping and social networking for mobile customers
The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate