The Treasury Select Committee has published a stinging report this morning on the failings of the Financial Services Authority’s oversight of RBS. The MPs on the committee was unimpressed, concluding that the FSA could and should have intervened in the bank’s takeover of ABN Amro. Its members believe the regulator should have stopped the takeover, and they criticise the FSA for failing to investigate the failure. The report says:
‘In December 2010 the FSA initially felt that a 298-word statement about RBS’s failure was explanation enough. This reflects serious flaws in the culture and governance of the regulator. It also reflects a fundamental misunderstanding of its duty to account for its actions to the public and Parliament.
‘In view of the vast amounts of public money committed to propping up RBS, Lord Turner’s comment that a Report into the demise of RBS “would add little, if anything, to our understanding of what went wrong” was inadequate. He should have grasped the need for a public explanation of how that situation had arisen, something which he has subsequently acknowledged. We would not expect the new chairmen of the regulators to repeat the error.’
The Committee’s report says the the FSA’s own report, which describes ‘failures and inadequacies in the regulation and supervision of capital, liquidity, asset quality and a failure appropriately to analyse the risks relating to the ABN Amro acquisition’ is a serious indictment’ of the senior management and leadership at the regulator.
More importantly, the Committee warns that the legislation currently going through parliament on banking deserves greater scrutiny, and that the regulators tell the committee with changes to statutory rules and law they think will improve the enforcement regime. Committee chair Andrew Tyrie hopes that the next step will be for the Parliamentary Commission on Banking Standards will examine the report’s findings and recommendations.
Lord Turner is one of the names in the running for the Governor of the Bank of England, but Tyrie was in a forgiving mood when he appeared on the Today programme this morning. He suggested that the FSA chairman would have valuable experience of operating in a crisis and learning from previous mistakes.
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