IT SHOULD not have been necessary for a committee of MPs to force Britain’s chief regulator to publish details of its investigation into the near-collapse of RBS.
This was a matter of utmost public concern and, as such, the Treasury committee’s report is an unapologetic indictment of the Financial Services Authority’s feeble handling of the issue. If its reputation was already badly tarnished by a record of calamitous failure, it is now truly in tatters.
Yet the 59-page document’s most useful purpose is in providing recommendations on how to avoid a repeat of the errors that brought the banking system to its knees; notable among them is a concern that the FSA is replaced with something better and more workable, but which is not rushed through parliament in haste.
In so far as it criticises the discredited regime, the report’s language is about as strong as would be allowable before the watershed.
It describes the FSA’s original 298-word summary of its decision not to take enforcement action against RBS as “an astonishing lack of appreciation of the understandable public interest in the failure of RBS”.
Lord Turner, who came in as chairman of the FSA in the eye of the storm in September 2008, is criticised for saying subsequent to that statement that a report into RBS would add little to our understanding of what went wrong.
He has since acknowledged that a public explanation was required, but the timing of this latest rebuke will do little to enhance his credentials for becoming the next governor of the Bank of England.
Government ministers have been promising us a tougher, stronger and more robust approach to supervision of the banks and the wider financial services sector, and a judgmental approach is a key weapon expected in the new system.
Regulators will be more hands-on and will be encouraged to tell those running our financial institutions when they do not like what they see. This will inevitably bring the regulators into conflict with some of the big players. And that is how it should be.