The Treasury select committee is calling for tougher enforcement rules from regulators in its report into the failure of RBS.
The TSC paper, The FSA’s report into the failure of RBS, published today, is a response to the regulator’s own report into the failure of RBS earlier this year.
The TSC says it is a matter of “considerable surprise” that nobody has been held accountable for RBS’ failure.
It states: “It is deeply regrettable that the current rules bias enforcement activity towards technical breaches to the detriment of attention to the most important regulatory failures.
“We request that the regulators report to the TSC on what amendments to the statutory rules and to the general law they believe are desirable in order to improve the effectiveness of the enforcement regime.”
The Parliamentary Commission on Banking Standards will also examine how to create tougher enforcement action as well as whether to introduce strict liability for bank directors.
The TSC also launched into a scathing attack on the role of the FSA in the collapse of the bank, particularly its failure to block the disastrous RBS takeover of ABN Amro in October 2007.
In response it calls for new powers at the Prudential Regulation Authority to approve banking takeovers and intervene when necessary.
TSC chair Andrew Tyrie says: “It is crucial the PRA takes on board an important lesson from this report – there is no substitute for the exercise of judgement. There are early encouraging signs that, in the PRA, judgement-based regulation is doing more of the heavy lifting than the FSA’s failed culture of box-ticking.”
The TSC also raises concerns about the delay in the FSA publishing a report into RBS’ failure, blasting “serious flaws” in the regulator’s culture, governance and sense of public duty.
The paper states: “It reflects a fundamental misunderstanding of its duty to account for its actions to the public and Parliament.
“In view of the vast amounts of public money committed to propping up RBS, Lord Adair Turner’s comment that a report into the demise of RBS ‘would add little, if anything, to our understanding of what went wrong’ was inadequate.”
Tyrie says without persistent pressure from the Treasury select committee, the FSA’s report would never have been published.
In light of the FSA resistance, the TSC is calling on the Bank of England to produce its own report into its performance during the financial crisis. Tyrie says a “radical improvement” of the Bank’s governance is still needed.