Apologies from the FSA

FSA Say Sorry

Thursday, 16 October 2008

Writes Hazel Cottrell hazel.cottrell@consumerchoices.co.uk

The chief executive of the Financial Services Authority, Hector Sants, publicly apologised yesterday for the regulator’s failure to ensure that banks were not adequately protected against risk.

The FSA (www.fsa.gov.uk) had previously apologised for its failure over the supervision of Northern Rock, but this is the first time that the financial regulator has admitted some culpability for the current banking crisis.

Following a lunch with business leaders in Edinburgh, Sants said: “We have said sorry and I am saying sorry for our supervisory failings. But this now is a global crisis and you have to ask if a national regulator alone could have taken sufficient action to ensure all UK firms survive this crisis untouched – and I doubt it.”

Sants admitted that the authority had not done its job properly but claimed that lessons were being learned, adding that the authority was considering ways to ensure that pay regimes did not encourage excessive risk-taking.

In contrast to Sants’ comments, not one executive from any of the affected banks has yet apologised for their role in the banking crisis. Sir Fred Goodwin, who stepped down from his role as chief executive of RBS (www.rbs.co.uk) on Monday, conspicuously failed to admit any responsibility for the bank’s current situation.

Sants, appearing to criticise the banks for not admitting their failures, also said: “It needs to be recognised that management, the buyers and sellers of these products, need to take a lot of responsibility for what has happened. Many people forgot the golden rule: do not sell or buy things you do not understand.”

The FSA is expected to publish recommendations on reform to financial regulation early next year.

Chris Eagle, commercial manager at CreditChoices.co.uk says: “The crisis we are facing at the moment is not the fault of any one company or organisation, but rather, is due to a multitude of factors and actions. The fact that the FSA are shouldering part of the blame - and claiming that lessons are being learned - is encouraging, but people will want an explanation from the executives of the banks too.”