Crisis Report on RBS Collapse to Undergo Scrutiny

Jack Humphrey, Regulatory journalist
May 06, 2011 /

The Treasury Select Committee (TSC) has called in two independent reviewers to look into the crisis report to be issued by the Financial Services Authority regarding the failure of Royal Bank of Scotland (RBS).

Similarly, a non-executive sub-group of the FSA Board chaired by Brian Pomeroy will conduct a separate review on the process and findings of the FSA’s report. The separate review is expected to “interface as appropriate with the independent reviewers.”

The report was prepared by accounting firm PricewaterhouseCoopers.

In mid-December 2010, FSA chairperson Adair Turner conceded to different calls asking the financial regulator to reveal the full report on the collapse of Royal Bank of Scotland, with business secretary Vince Cable having met with Turner to urge him to disclose full details of it as much as possible.

Turner gave in to the pressure and said the FSA would publicly disclose the crisis report by the end of May. Turner earlier refused to make the report public despite the approval of former RBS CEO Fred Goodwin to open the report.

Last year, the FSA closed its investigation into the RBS collapse without taking to task the individuals liable for the incident, causing a public uproar.

Now, with the independent review being slated to kick off soon, further delay on the disclosure of the report is expected as TSC chairperson Andrew Tyrie confirmed that the committee has appointed David Walker and Bill Knight to conduct an independent review on the report.

Walker is currently the senior adviser to US bank Morgan Stanley while Knight is the solicitor and Chairman of the Financial Reporting Review Panel and director of the Financial Reporting Council.

Their appointment came after the FSA and TSC discussed on how to ensure that the report “will be seen as a rigorous and transparent account of the different factors” that helped to bring RBS down.

The FSA’s report includes analysis of how RBS came to its fall prompting a £45 billion taxpayer bailout , a summary of FSA’s findings about the matters relating to RBS’s decisions, risk controls and governance processes and an assessment of the FSA’s regulation and supervision of RBS identifying any deficiencies.

Walker and Knight will look into the impartiality of FSA’s report reflecting the findings of the FSA’s investigation of RBS and the findings of its analysis of its own regulatory and supervisory activities.

Turner said the FSA commits to produce a “clear account of the causes of RBS’ failure” following a “strong public interest” in the matter.

Although the FSA recognizes the public clamor, it takes into consideration the time required to produce the report given that “the causes of RBS’ failure were complex and multi-faceted” and that there is a “need to respect due legal process and confidentiality constraints.”

Turner said he is confident that ” the final report will be seen as an open, fair, and valuable contribution to public understanding” with the appointment of Walker and Knight.

RBS failed in 2008 when it faced troubles securing short-term funding to survive the global financial crisis. It failed after acquiring ABN Amro shortly before the crisis.

The company was, however, bailed by the taxpayer. At present, 83% of RBS stock is owned by the taxpayer.


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