FSA hands over control of RBS probe to independent review

The Financial Services Authority (FSA) has handed over effective control of its investigation into the near collapse of Royal Bank of Scotland to an independent review ordered by Parliament.

Sir David Walker, who has been put in charge of the inquiry into the FSA’s work, has been given the power to interview officials at the regulator as well as former RBS managers and directors as part of his independent review of the FSA’s report.

Under terms of reference published on Wednesday, Sir David, a senior former banker who had already written a report for the Government into the failures of governance at banks before the financial crisis, will assess whether the FSA’s report is a “fair and balanced summary of the Authority’s own analysis of its regulatory and supervisory activities in the run-up to the failure of RBS”.

The Treasury Select Committee has ordered the FSA to hand over draft copies of its currently unpublished report to Sir David and Bill Knight, a senior City lawyer, who are expected to spend several months reviewing the regulator’s work.

Sir David and Mr Knight have been told by the Committee that they should “invite the FSA to reconsider aspects of the report” if they do not think it provides a full account of the circumstances that led to RBS’s collapse, and must also provide MPs with details of any instances where their review leads to “significant and substantive alterations”.

The publication of the terms of reference follows months of often fraught negotiations between Lord Turner, chairman of the FSA, Hector Sants, the regulator’s chief executive, and Andrew Tyrie MP, chairman of the Committee.
Mr Tyrie has been instrumental in calling for the FSA to make public its report into the failure of RBS and has pushed the regulator to ensure that the final document provides a complete and balanced account of the circumstances that led to the collapse, including the FSA role in it.