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TSC advisers pressured FSA to scrutinise role in RBS failure

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  • 13/12/2011
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Special advisers to the Treasury Select Committee have revealed they felt compelled to press the Financial Services Authority to better scrutinise its role in the downfall of Royal Bank of Scotland.

The FSA yesterday published its long awaited report on the causes that led to one of the biggest banks in the world needing an 83% taxpayer bailout.

The 400 page document is a far cry from the single page explanation the FSA intially released, in what chairman of the TSC Andrew Tyrie said amounted to the public “being brushed off” in exchange for the billions of pounds taxpayers put at risk to save the bank from collapse.

But evidence from special advisers appointed by the TSC, who reviewed all of the same information the FSA had when compiling the document, have revealed they had to go back to the to the regulator to press it for more information about its role in the failure.

During the drafting process, Bill Knight and Sir David Walker found five material areas where they felt compelled to suggest alterations to the FSA’s report.

Two related to the FSA’s conduct prior to RBS’ collapse and another on the regulator’s decision making during its investigation.

The special advisers wanted a fuller description of the nature and degree of involvement of the FSA board in setting or endorsing relevant policy in the run up to the banks’ failure.

They also called for a more detailed review and conclusions on the FSA’s response to the “exceptional complexity, method of execution and risks inherent in the ABN AMRO acquisition”, given the seriously limited due diligence process RBS undertook.

On the report itself, the advisers pressed for a fuller explanation of the FSA’s reasons for focussing on the areas it did for the enforcement investigation.

Elsewhere, Knight and Walker wanted more details on the role and responsibilities of RBS chief executive Sir Fred Goodwin, especially how he delegated activities in the credit, sales and trading businesses.

They also wanted a closer scruntiny of the activities of the RBS Board, especially in relation to oversight of the very rapid balance sheet expansion in the review period and the ABN AMRO acquisition.

 

 

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