The FSA is putting together plans which could see former directors of failed banks being banned from running financial institutions.
The regulator’s business plan, published yesterday, says the FSA will is looking at a number of ways to make it easier to refuse an approved persons application. The FSA will set these out is a discussion paper set to be published in the first six months of this year.
It says: “We are examining various options to make it easier to refuse an application for an approved persons status on the basis that the person’s previous role as a director of a bank that failed raises fundamental questions about their competence or general suitability to perform a similar role again.”
Tens of billions of pounds of public money was spent when Royal Bank of Scotland and Lloyds Banking Group needed bailing out by the Government at the height of the financial crisis in 2008. RBS is now 82 per cent state owned while 40 per cent of Lloyds is in public ownership.
Northern Rock’s business model was heavily dependent on wholesale funding markets and when liquidity dried up in 2007, its customers withdrew billions of pounds in the first run on a bank for over a century. Eventually the bank was nationalised in February 2008.