The Treasury select committee has slammed the FSA, the Bank of England and Barclays for a series of failures surrounding the Libor rate-rigging scandal.
Its report, Fixing Libor: Some Preliminary Findings, published last week, criticises the FSA for failing to carry out adequate supervision and governance and its inability to act on information from various sources.
In June, the FSA and US authorities fined Barclays £290m for rigging the Libor and Euribor rates.
A number of other banks, including the Royal Bank of Scotland and HSBC, are under investigation.
The TSC’s report criticises the FSA for not spotting the “extreme weakness” of Barclays’ internal compliance procedures for Libor setting despite numerous visits to the firm.
It also expresses concerns that the FSA was two years behind US regulators in investigating Libor, which it says contributed to the perceived weakness of London’s regulatory system.
The TSC criticises the FSA’s approach to corporate governance, saying the regulator appeared content to allow former Barclays chief executive Bob Diamond to continue in the role. Diamond decided to resign in July amid growing public pressure surrounding the scandal.
The report contains damning criticism of Diamond, branding his evidence to the TSC as “lacking in candour and frankness”.
The TSC says Barclays’ culture was “deeply wrong” and went well beyond Libor. It says there was a defective system of controls at the bank that incentivised traders to benefit their own book, even to the detriment of the bank and shareholders.
Barclays says it has now ordered an independent review of its business practices.
A spokesman says: “While we do not expect to agree with every finding in the report, we recognise that change is required, not least to restore stakeholder trust.”
In its report, the TSC accuses the Bank of England of naivety for not anticipating wrongdoing with regards to Libor rate-setting.
The FSA claims the report endorses the new judgement-led approach to regulation.
A spokesman adds: “The FSA has already put in place a number of reforms in recent years, including a tougher fines policy for enforcement cases and a completely new model of bank supervision. We will study the report’s findings and Martin Wheatley will consider it as part of his Libor review.”
Financial Conduct Authority chief executive designate Wheatley is reviewing how Libor can be strengthened and its governance made more robust.
Jacksons Financial Services managing director Pete Matthew says: “There should certainly be questions at the FSA as to why it did not spot the problems with Libor setting.”