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‘Whistle blower’ accuses regulator of failing to police societies

A former FSA supervisor has accused the regulator of “apathy and complacency” in its regulation of building societies before the financial crisis.

LibDem Shadow Chancellor Vince Cable wrote to FSA chairman Lord Adair Turner last week after being contacted by the unnamed whistle-blower, who claimed the FSA turned a blind eye while societies paid high prices for risky self-certification loans and became increasingly dependent on wholesale funding.

An FSA spokeswoman says: “The accusations are not an accurate reflection of our supervision of building societies in recent years other than the fact that, as we have said many times, we did not previously focus on the business models or commercial judgements of firms with the intensity we do now.

“In respect to the current position, it is important to note that all the building societies rated by Moody’s passed a stress test that we made them undertake in order to qualify for the Government’s credit guarantee scheme last autumn.”

A Building Societies Association spokesman would not comment on the specific allegations against the FSA but says: “We do not know who the whistleblower was and the circumstances of their departure from the FSA. We should not give it too much credence.”

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