From the Editor: Excuses, excuses... when will the FSA learn?

The best excuse coming out of last year’s MPs expenses scandal came from the lips of Anthony Steen.

“I’ve done nothing criminal,” he said. “Do you know what it’s about? Jealousy. I’ve got a very, very large house. Some people say it looks like Balmoral.”

The public expected a swift apology from Steen, and they got one, but an apology to taxpayers may be too much to expect from the FSA after it made its own extraordinary excuse for costing them some £20bn (and counting) this week.

The regulator has now published its much-awaited report into the near-collapse of Royal Bank of Scotland in 2008. It largely pinned the bank’s struggles on “underlying deficiencies in RBS management, governance and culture”, but it also conceded its supervision of banks at the time was “deficient” and “flawed”, if not negligent.

The FSA report was a weighty 452 pages (large even for the FSA), but we came across an interesting paragraph on page 261, where the regulator attempted to explain its lax regulation of the banking system in the run-up to the financial crisis.

It read: “FSA senior management attention could be, and was in fact, diverted towards a number of current and legacy issues related to firms’ treatment of consumers which at the time were perceived as more pressing and important (for example, the Retail Distribution Review (RDR) and Equitable Life).”

The point was later repeated in a BBC interview given by FSA chairman Lord Turner, who said the culture of light touch regulation in 2008 was one underlying cause of the problem.

Of course the implication here – unintended I’m sure – is that some readers of this publication had a role to play in the RBS debacle; that advisers’ impassioned protests against the RDR were sufficient enough to keep the FSA’s supervisory team from doing its job.

This is a staggering claim, and one which will only fuel the widespread discontent some advisers feel toward their regulator.

The costs to the UK public of the RBS debacle have been monumental. Taxpayers had to rescue the bank by injecting some £45bn into it and, according to the latest estimates, are sitting on a loss of more than £25bn on this investment.

The FSA was right to make public its own shortcomings during the RBS crisis. But it knew its responsibilities stretched across the whole UK financial system. Blaming one sector for its ignorance of failings in another is a weak excuse, which only serves to justify the dismantling of a regulator unable to meet its obligations

Scott Sinclair, editor, Professional Adviser and IFAonline.co.uk