Friday, December 3, 2010

English Regulators "Fess-Up"

As England contemplates how to regulate financial institutions in the future, its regulators are beginning to "fess-up" about their failures leading up to the crisis.

In a recent post on this blog, the issue of English bank regulators and their examiners having difficulty with correctly analyzing bank data was discussed.  Specifically, Andrew Haldane from the Bank of England offered up that the regulators can be overwhelmed by the data as the reason for failures.

As reported by Reutuers in late November 2010, Hector Sants, the head of FSA, "told lawmakers the central bank has admitted to errors but in a 'more elaborate and lengthy process' than the FSA has.  'The FSA had a cleaner, more straightforward approach to fessing up.'
Few central banks or regulators spotted the global crisis coming, forcing policymakers in Britain and, again this week in Ireland, to take radical and expensive steps to shore up banks.
Britain is scrapping the FSA and handing many of its supervisory powers to a new prudential regulatory authority at the Bank that will be headed by Sants to plug gaps seen during the crisis.
'The level of communication, the level of interest in the central bank on financial stability issues, I think, was recognised by all to be very low in the pre-2007 period."

On December 2, 2010, FSA showed how they fess-up.

The Wall Street Journal ran a blog entry discussing how the Financial Services Authority Unwittingly Blames Itself in RBS Fiasco.

"The U.K. Financial Services Authority unwittingly pointed the finger of blame back at itself by concluding Thursday that Royal Bank of Scotland executives didn’t break the rules in the lead-up to the bank’s near collapse.

...The business moves that contributed to RBS’ weakened state when the crisis hit were described by the FSA Thursday as 'bad decisons'

...But the regulator’s conclusion that no one within RBS was particularly to blame begs the question about its own role in the matter.

... the FSA was supposed to be making sure RBS was sound, and fulfilling its broader task of protecting the stability of the U.K.’s financial system. But just months after approving RBS’ purchase of ABN Amro and determining it had enough capital to support it, it was signing off on the prospectus for RBS’ £12 billion rights issue to help cover losses in the Dutch bank’s rapidly-deteriorating credit portfolios.

...It previously admitted that it didn’t adequately supervise Northern Rock before its 2007 failure.

No comments: