RBS: The report | FT Alphaville

RBS: The report

The FSA’s report into the failure of RBS is out.

Scroll down/expand for the six key factors highlighted in the press release, or click the image to get to the landing page for the full report.

RBS - FSA report screenshot

Specifically, the Report concludes that the failure of RBS can be explained by a combination of six factors:

– significant weaknesses in RBS’s capital position, as a result of management decisions and permitted by an inadequate global regulatory capital framework;

-over-reliance on risky short-term wholesale funding, which was permitted by an inadequate approach to the regulation of liquidity;

– concerns and uncertainties about RBS’s underlying asset quality, which in turn was subject to little fundamental analysis by the FSA;

– substantial losses in credit trading activities, which eroded market confidence. Both RBS’s strategy and the FSA’s supervisory approach underestimated how bad losses associated with structured credit might be;

– the ABN AMRO acquisition, on which RBS proceeded without appropriate heed to the risks involved and with inadequate due diligence;

-and an overall systemic crisis in which the banks in worse relative positions were extremely vulnerable to failure. RBS was one such bank.

The juicier-looking chapters are here and here (PDFs).

More to follow…

One quick thought. Why has no one taken responsibility for a failure that has cost British taxpayers billions?

The head of the FSA at the time RBS went down is now Deputy Governor Designate of the Bank of England and CEO designate of the Prudential Regulation Authority. The economic secretary to the Treasury at the time is now the shadow chancellor. Meanwhile, Sir Fred Goodwin is still drawing his pension and the former head of RBS’s investment banking operations is allowed to work as a part-time financial consultant in the City of London.

That’s the real tragedy of this sorry story.