City Regulator Criticises 'Poor Decisions' That Caused RBS Collapse
The near-collapse of Royal Bank of Scotland (RBS) followed a series of "very poor decisions" by executives including Sir Fred Goodwin, the head of the City regulator has said.
Hector Sants, chief executive of the Financial Services Authority (FSA), told MPs on Monday there had been "serial misjudgment" for which the executives should be banned from working for financial institutions again.
His comments come amid demands for Sir Fred, who was chief executive of RBS when it had to be bailed out by the taxpayer in 2008, to be stripped of his knighthood. The matter is being considered by civil servants on the Honours Forfeiture Committee.
Mr Sants' appearance comes after the FSA recently published a report into the failure of RBS, which found that its £49 billion takeover of Dutch bank ABN Amro in 2007 made a troubled situation "much worse".
But some commentators have questioned why it did not level more direct criticism at Sir Fred and other senior executives, the Press Association reported.
Mr Sants said today: "The substance of the report is to make clear that we consider the board and the senior executives at RBS, which includes Goodwin, to have made a series of very poor decisions which led to the bank failing."
He said that failings were "demonstrated over a prolonged period", adding there was a "clear track record of a series of misjudgments by executives at RBS".
"Going forward we should change the regulatory regime to allow the regulator to take those assessments into account to ensure the sort of people who have made that sort of serial misjudgment are not allowed to work for financial institutions," he told the committee.
Amid criticism that the FSA did not step in to prevent what he described as the "highly risky" takeover of ABN Amro, Mr Sants said that before he became chief executive in July 2007 that its "approach to supervision... before the crisis was inadequate" and "totally unacceptable to me".
He said he changed its approach as soon as he could, but insisted there was no ground for intervention because the deal met threshold requirements. "There was no regulatory basis for an intervention," he said.
Mr Sants said that, prior to his becoming chief executive, the takeover had not been the subject of "any substantive discussion" by the FSA board members.
"The FSA under the previous executive management operated in a very siloed manner and we did not discuss specific major supervisory issues in our executive committee and we were not encouraged to question or debate the approach across the silos, across the areas," he said.
"We did not convene any discussion on the merits of the deal."
Asked whether there was a board-level discussion of the takeover, he added: "To the best of my knowledge there was not. I think the existence of the takeover was reported by the then managing director responsible for it but you would not describe there having been any substantive discussion at the board level."