FSA’s mea culpa reveals a dysfunctional regulator
FSA’s report reveals a dysfunctional regulator, paralysed by high staff turnover and organisational changes
Staff at Britain’s main City regulator paid scant attention to
Northern Rock in
the two years before its collapse, kept few records of meetings and failed to
act on signals that the lender was acting recklessly.
This is what
Financial
Services Authority (FSA) admits in its internal report, which reveals a
disfunctional organisation paralysed by high staff turnover, regular
organisational changes and a constant series of events in the City which
dominates all their time, according to The Guardian.
The report reveals supervisors presented their managers with few reports on
the risks taken by Northern Rock, leaving managers unable to form a strong view
of the bank’s business model, which has since been described as ‘reckless’.
Managers, in turn, asked few questions of their staff and unknowingly let the
risks go on over several years, despite soaring lending growth at the bank,
which by the start of last year accounted for a fifth of UK mortgages. Still the
bank was not challenged in any meaningful way before April 30 last year.
Further reading:
FSA report expected to admit Rock mistake