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Head of FSA "truly sorry" re RBS - so that's ok then.


CliveH

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This is behind a paywall but may be of interest::-

 

 

FSA chief 'truly sorry' for RBS failure

31 Jan 2012 | 08:03

Rachel Dalton

Categories: Economics / Markets | Regulation

Topics: Fsa

Hector Sants, chief executive of the Financial Services Authority (FSA), has apologised to MPs for the failure of the Royal Bank of Scotland which led to the multi-billion pound bailout of the bank.

 

 

Sants, who is set to become deputy governor of the Bank of England, said he is "truly sorry" for the bank's failure that ended up costing the taxpayer £45bn, according to the Telegraph.

 

 

Giving evidence to the Treasury Select Committee (TSC) on Monday, Sants said he would not let any of the lender's former managers work in finance again.

 

Sants faces another session with the Committee again to confirm his appointment to the Bank when he takes over the running of Britain's new banking regulator next year. The Committee could recommend he is unsuitable for the job, though they cannot formally block his appointment.

 

In a shocking admission, Sants added yesterday he was "talked into" applying for the most senior post at the regulator.

 

Sants made the claim during the meeting with MPs, where FSA chairman Lord Turner and director Margaret Cole also gave evidence on the collapse of RBS.

 

In response to questions about his own role at the regulator, Sants said he had no ambition to become the chief executive when he joined the FSA as managing director of wholesale and institutional markets in 2004.

 

He said he did not think his predecessor John Tiner would leave in 2007 and that he had not planned to apply for the job.

 

However, Sants said he was convinced to apply for the chief executive role and had not planned to stay at the FSA as long as he has.

 

 

 

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CliveH - 2012-01-31 12:30 PM.....................Giving evidence to the Treasury Select Committee (TSC) on Monday, Sants said he would not let any of the lender's former managers work in finance again.......................

Then perhaps he should finish the job, and disbar himself from that BoE job as well? :-)

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Brian - agree 100% - tho it has to be said he was only "at the helm" from 2007 onwards and the rumour is that as his John Tinner, before him, left unexpectedly as he may have had some idea of what was about to hit the fan.

 

Dave - as for bonus - yes FSA staff do get bonuses:-

 

"In the 2009/10 budget, the FSA’s staff costs, including travel, training, recruitment and pension scheme deficit reduction contributions, totalled £306.4m. This was up by 24.4 per cent from £246.4m in 2008/09.

 

The average bonus paid to regulator executives in May last year was £19,100, while the average for other staff was £4,107."

 

Full details at:-

 

http://www.moneymarketing.co.uk/regulation/no-pay-rises-at-fsa-but-bonuses-will-continue/1005298.article

 

It is also worth noting that the financing of the FSA is from a levy that is applied to the Financial Services Industry as well as the fines that the FSA applies to those firms who break its rules. So the cost of th FSA has to be factored into the "advice process".

 

One notable case was where L&G and Friends Provident were fined huge sums for not listing the Trustees on plans like S32's and COMPS which are types of "safe haven" pension plans to ringfence the pension pots of employees whose employers go bust. The rules state that the original scheme no longer stands and therefore there are no trustees and so the firms holding the rescued plans take over the role of Trustee.

 

Some idiot in the FSA decided that L&G and Friends Provident should have kept details of the old Trustees (which for various reasons is not possible if, sometimes years after the employer went bust, the pension scheme finaly gets put into safe hands and "ringfenced") and because they could not provide the names, the FSA went ahead and fined these providers many £100,000's.

 

They took the FSA to court and won because the Judge realised that to fine such a company simply meant that the Provider had less money to apply as growth to those very schemes they were trying to protect and that bizarrley, considering its actions where the FSA had a specific government mandate to protect the consumer. The Judge actually went out of his way to criticise the FSA for the way it tried to manipulate the situation.

 

In an action that then raised eybrows throughout the financial world, the FSA then in 2005 set out, it seems to "get" L&G in particular. Friends Provident as a relatively small Mutual, was in some ways, protected by its status as a mutual because any fines leveled against it had to come out of the policyholders pot of money because, as the Judge had said, there were no Shareholders to cushion the blow/fine.

 

As the report below indicates. the FSA tried to "get" L&G over endowment misselling - which L&G was never a big player in and so - surprise surprise, the FSA suffered another humiliating defeat.

 

http://www.independent.co.uk/news/business/news/fsa-in-error-over-lampg-misselling-6154536.html

 

A couple of para's from the report:-

 

"However, it added that during two routine inspections of L&G, in 1996 and 1999 - which included a full examination of the mortgage endowment sales process and documentation - the regulator had failed to find any serious fault which it deemed to merit enforcement action.

 

Only after these inspections did the FSA begin to change its position, and claim that L&G's sales procedures and documentation were not sufficiently rigorous, it said.

 

The Tribunal also criticised the FSA's assessment of the extent of the mis-selling at L&G, arguing that the regulator's assertion, that some 60 out of a sample of 250 customers were mis-sold, was incorrect. In fact, it said, just eight of the 60 were proven to have been mis-sold, while a further 14 were deemed likely to have been mis-sold."

 

 

 

It was clear to all that after being given a pasting in law by L&G, the FSA went back to L&G's "file" and fabricated false data to make out that L&G had done something far far worse that it actually had. The Courts PROVED that the FSA made up their so called data that 60 out of 250 had been missold - when the reality was 8 out of 60 (still too high but not what the FSA inferred)

 

The FSA, from the Equitable Life Debacle, though Split Caps, Northern Rock and RBS has demonstrated time and time again that consumer protection is not the highest item on its cloudy, often vindictive and dubious agenda.

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Now I fully accept to being a dumb individual most of the time but in the case of RBS I have yet to have explained to me exactly what went wrong. Fred the Shred had his knighthood removed today so everybody in Westminster was very happy that they had a scapegoat and they could all go back to fiddling their expenses without worry.

 

There has never been any inquiry into what happened at RBS, or any other bank for that matter so the true facts have yet to be made public. What i can see, and others may disagree, is that RBS expanded by buying other financial institutions, merging them by cutting costs and making profits on the results. Everybody it seems from the Queen down was absolutely delighted. Nothing really different from any other mega corporation there as far as I can see. Their domestic banking operations have always made a profit and even Fred refused to allow investment banking to have any sway until the end when he hoped it might be a lifesaver. According to the news hounds he foundered by buying ABN/AMRO, evidently a real basket case of a bank. He is also accused of buying it without due diligence, in other words looking through the books. So, can someone please explain to me how Barclays spent months chasing this same bank and no doubt looked at the books as well and both banks had accountants who are supposed to be clued up on all these things. Barclays are probably thanking their lucky stars they lost the bid war, but they were equally determined to have ABN. Also ABN is the main bank in Holland backed by the Bank of the Netherlands (their version of the BofE)so why did no one in the Dutch Government find out it was so bad? Was it all smoke and mirrors? Also I see that ABN is still operating profitably and is expanding so where are all these so called losses? According to the news the RBS failure was the biggest catastrophe in banking history, I regret that I actually thought it was Lehman Borthers that caused the crisis and RBS was sucked in along with every other bank in the world. The money that the UK Government put in, the so called £24 billion is still sitting on the balance sheets. It is a guarantee if you wish, but has not been spent.

 

I am not a fan of Fred Goodwin but it does seem clear that he is being made a scapegoat. Yes, take away some of his huge pension and yes, if necessary strip him of his knighthood, but then ensure that all others equally culpable receive the same fate. After all Gordon Brown and even Ed Milliband were part of the crew supervising all this. Gordon managed to rack up debts that outstripped anything Fed did, so why is he not being chased? Fred had a Board that approved everything he did, so why are they not being punished? Why are th heads of Lloyds and HBOS not being held to account? Is it because the Government has things to hide? Bob Diamond at Barclays is the biggest gambler of the lot but as he is American, is beyond criticism evidently.

 

As far as I can see a good day for the baying mobs, a bad day for dignity and justice.

 

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As far as I can make out from tonights' TV interviews, Goodwins' biggest mistake was making a lot of enemies on the way up, so no supporters when it all went pear shaped, and not a lot of sympathy in the business sector today.

 

Scapegoat ? Yes

 

( But it gives the impression that " the government is taking action !!! ")

 

Will it change anything ? I doubt it.

 

We need people with huge egos in big business - but we don't have to like 'em.

 

 

;-)

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These give some background

 

http://www.guardian.co.uk/business/2011/jan/10/fsa-paid-millions-for-rbs-report

 

http://www.ifaonline.co.uk/ifaonline/news/1932501/fsa-cracks-pressure-rbs-decision-papers

 

There is no doubt in my mind that just like with Equitable Life through to Northern Rock - The FSA was incompetent and asleep at the wheel at best or "in bed" with the big business it was supposed to be regulating.

 

I find it incredible that Goodwin could get the FSA to remove a section of an FSA report that coverred him and his experience.

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I agree with that, Clive, though I still harbour suspicions that the FSA did not act entirely of its own volition with its "Nelson's-eye" approach to regulation. I find it difficult to believe that there were not strong Chinese-whispers coming from the Treasury, the Chancellor, and even the BoE, that invasive regulation was not what was wanted.

 

I also have some difficulties with recent events. First, I'm uneasy at the singling-out of Fred Goodwin as fall-guy. That he was instrumental I do not contest, nor am I much fussed that he has now lost his Knighthood. I am rather more fussed that he retains his excessive pension, but suppose he would have to face criminal charges before that could be retrospectively seized - though I think it should be.

 

What really fusses me though, is the way in which the other board members, all of whom seem to have been generously paid - sorry, compensated - seem to have escaped scot-free. IMO, a board is a board, and acts collectively. Members have an obligation to voice concerns, and if outvoted, have two remedies. They accept the judgement of their peers, or they resign. If they accept, that becomes their judgement on the issue: it is a collective verdict from which the only escape is resignation. So, what is sauce for the Goodwin goose, should also be sauce for the board gander. I also object to the "it weren't us Guv, Fred done it" argument because these people are not paid to be there merely to act as rubber stamps for the CEO. If that is all they became, strip back their remuneration to that of middle management, strip their bonuses, and reduce them to the ranks, which is where their performances seem to leave them.

 

My second worry is over the level of responsibility laid at the door of the FSA. The argument was again repeated on the radio today, that the real fault was not Goodwin's, for directing the disaster, but that of the FSA, for failing to stop him. This argument seeks to make the game-keeper responsible for the actual poaching, rather than for having been out-smarted by the poachers. If thieves rob a bank, we don't generally blame the police, saying the robbery was their fault, because they failed to catch the robbers in the act and arrest them. We tend to expect the police to investigate, assemble evidence, identify culprits, make a case, and then leave the courts to make judgement. Here, we seem to be expecting the FSA to have acted before the event, as though under some version of anti-terrorist legislation, and intervened to stop RBS in its tracks. Personally, I think that unworkable, and far worse for good governance than even a sleepy FSA. Surely, it must be for boards alone to govern their companies, in the full knowledge that they are collectively answerable for their actions. Having regulators nipping in and out and vetoing this and that, can only, IMO, result in the boards authority being abrogated in favour of the regulator, with the result that instead of the judgement of experienced individuals, what would rule would be a game of cat and mouse with the regulator as boards sought to hoodwink and outwit it. Surely, the worst of all possible worlds?

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I agree that it is not the role of the FSA to pre empt disasters, but in this instance we were talking about the UK's largest Company and the at the time, the world's largest bank. When it embarked on a £42 billion takeover one would have expected someone in the FSA to have had even a cursory look at things.

 

However, I do accept that as part of these same arguments the FSA could be expected to assume that RBS knew exactly what it was doing, which does not seem to have been the case. I would not expect the Board or Fred to examine ABN/AMRO in minute detail, they pay thousands of staff to do things like that and expensive accountants to look at the books, so it seems everybody got it wrong. Now, maybe they gave Fred the conclusion he wanted all along, but in that case they are equally as culpable.

 

If bringing a bank to disaster merits such punishment then why are Daniels and Blank not also in the frame for what they did to Lloyds? Or does not mean Brown has to be brought in, and polticians do not like to see any of their own in the dock do they?

 

Again, to argue against myself there have been claims he was unfairly punished because he has not been charged with any offence. However, he signed of on a Rights Issue that patently was false and does merit prosecution under the Code of Practice of Directors. A Class Action has been raised in the US on this, but nothing here, why not? If they can jail the head of Enron for fiddling the books then we should be doing the same, then I would then have no problems with removing the knighthood, but then again so should Archer and a few others lose theirs.

 

I still feel that although it may have been a right decision the way it was done, and expecially if it is the only one, smells.

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The FSA's main task is to protect the consumer. However, time and time again it has proved that it tries to prop up dodgy organisations.

 

The main issue that thankfully fell over because of the Banking crisis was that Brown realised the FSA was useless and went to the Banks for help. Thus the Poachers became the Gamekeepers rather that you suggest that the Gamekeeper is being blamed for the actions of the Poacher.

 

Not-Sir Fred wasactually seconded to the FSA before he became head of RBS.

 

But you only have to look at the Parliamentary Ombudsmans report on Equitable Life to see where the issues lie.

 

http://www.ombudsman.org.uk/about-us/media-centre/press-releases/2008/pr2008-07

 

Points worth noting:-

 

"The Ombudsman said:

 

“The failings I have identified in this case were not failures of the system of regulation that was in place at the relevant time. The aim of that system was the protection of the interests and reasonable expectations of policyholders and potential policyholders. Parliament gave those operating that system robust and wide-ranging powers, which the regulators were under a duty to consider using where appropriate. The regulators at the time said that they would deliver regulation in a proactive and vigorous way. That singularly failed to happen in the case of Equitable.”

 

 

Ann Abraham also said:

 

“The case of Equitable Life, which echoes earlier cases such as Vehicle & General in the 1970s and shares some similarities with the current example of Northern Rock, illustrates the need for absolute clarity as to what can and cannot be expected from financial regulation and the development of shared understandings as to the limits to the protection that such regulation offers to investors both before and after problems arise, as they inevitably will. Key, however, is that those responsible for undertaking financial regulation should act in a way that is compatible with the duties and powers which Parliament has conferred on them. Those responsible for the prudential regulation of Equitable Life failed to do so throughout the period covered in my report.”

 

 

The Ombudsman also said:

 

“I have alerted Parliament to the injustice which I have found in this case resulted from serial maladministration on the part of the former Department of Trade and Industry, the Government Actuary’s Department and the Financial Services Authority. I recognise that my recommendations raise questions which are now properly ones for Parliament and Government together to consider. I stand willing to assist in their consideration of the issues raised by my report and of the recommendations which I have made.”

 

 

End

 

Notes to editors:

 

 

Ann Abraham holds the post of UK Parliamentary Ombudsman and is also Health Service Ombudsman for England. She is appointed by the Crown and is completely independent of Government and the NHS. Her role is to provide a service to the public by undertaking independent investigations into complaints that government departments, a range of other public bodies in the UK, and the NHS in England, have not acted properly or fairly or have provided a poor service. There is no charge for using the Ombudsman’s services.

 

...................................................

 

I would also point out the vindictive nature of the FSA as exemplified by the Judges comments in cases where some companies had evidence against them fabricated by the FSA - of which the L&G case is probably the best known example and is outlined in my earlier post on this thread:-

 

31 January 2012 5:11 PM

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