Treasury Select Committee slams FSA

  • anrigaut
  • 19/10/08 30/10/09
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Posted: Mon, 21/01/2013 - 21:22

As reported today by CityWire:
"A report by the Treasury Select Committee has laid out the failings of the FSA which it said ‘left consumers exposed to some of the worst scandals in UK financial history’."
...
"The Committee goes on to criticise the board of the FSA, which includes recently knighted chief executive Hector Sants, for failing in its oversight of the organisation."

http://www.citywire.co.uk/money/mps-fsa-left-consumers-exposed-to-worst-...

In a related article, Michelle McGagh asks "Should the financial regulator be fined for its mistakes?" :

"... It’s a pretty shocking legacy that the FSA will leave behind when it is superseded by the Financial Conduct Authority (FCA) later this year. Since the FSA was established out of the Securities and Investments Board in 1997 it has dropped the ball on many occasion.

The most notable is obviously its failure to prevent the banking crisis that hit in 2007 which ended in taxpayer-funded bailouts and a re-organisation of high street banking. And let’s not even talk about the most recent banking debacle surrounding Libor.

Scandals that were smaller, but of no less importance to the individuals involved, that the FSA failed to spot can easily be reeled off: Arch Cru, Equitable Life, payment protection insurance (PPI) claims, split-cap investment trusts, precipice bonds, self-cert mortgages, endowment policies, Keydata. The list goes on.

The Treasury Select Committee was right to admonish the FSA over its ‘box-ticking culture’ which meant it failed to spot the scandals in front of its nose. So concerned was the FSA with filling out the forms that it didn’t bother investigating what was happening at the heart of organisations, or more importantly how consumers were being treated.

The comments in the Committee’s report are an embarrassing attack for the FSA and you could say its punishment is being abolished and replaced by the FCA.

But is this really punishment enough for those at the top of the tree who oversaw the organisation's failures? "
...
"The FSA has made some meek admissions to being in the wrong. In October Lord Turner, FSA chairman, said ‘bad rules’ were allowed to remain in place and ‘a lot of very clever people got it very wrong’ – what an understatement.

The fact is the FSA didn’t bother to put the rules right because the people at the top wouldn’t have to be accountable for it. In fact, they’re so unaccountable that they can be rewarded for their failures; take the recently knighted FSA chief executive Hector Sants."
...
"Maybe a series of penalties for those at the head of regulatory failings would provoke a change of attitude, a change from box-ticking to real investigation, and ensure that the FCA doesn’t just become a rebranded FSA."

http://www.citywire.co.uk/money/should-the-financial-regulator-be-fined-...

At last the TSC seems to be showing some teeth. But why has it taken so long? And will it change anything? I very much doubt it, but at least the word is spreading - and who knows, maybe one day pigs might fly ...

Update: The comments on the FSA appear in the Summary of the Treasury Committee report on the appointment of John Griffith-Jones as Chair-designate of the FCA: http://www.publications.parliament.uk/pa/cm201213/cmselect/cmtreasy/721/...

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Why we have all been so badly let down by the FSA!

  • anrigaut
  • 19/10/08 30/10/09
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  • Fri, 25/01/2013 - 21:37

Rowan Bosworth-Davies' blog:
http://rowans-blog.blogspot.fr/2013/01/why-we-have-all-been-so-badly-let...

Selected extracts:

"It is now official, the Financial Services Authority has been recognised as a complete failure in helping to protect the interests of the British financial services consumer.

This not-too-surprising finding has been made by none other than the H.M Treasury Select Committee in a report you can read in its entirety here;

http://www.publications.parliament.uk/pa/cm201213/cmselect/cmtreasy/721/...

When a committee of M.Ps decides to admit that the lead financial regulator is about as much use to the consumer as the FSA has proved to be, I think we are entitled to sit up and take notice."

...

"The Select Committee's findings are scathing in their denunciation. Remember, this is a Government committee and it is talking about an agency over which it held a supervisory role. Normally, such committees tend to pull their punches and water-down their criticisms, but not this time! The Summary of the report continues;

"...The FCA is the successor to a body which failed consumers. Although it devoted a great deal of time and effort to conduct matters, it left consumers exposed to some of the worst scandals in UK financial history..."

Well, there you have it, the FSA failed consumers. ... "

...

" I cannot impress just how serious these criticisms are of a public body, which up until last week apparently enjoyed the full confidence of Government. They are scathing in their scope, and they are reputationally damaging in the extreme.

Finally, The worst thing is that virtually all of the disgraced employees of the FSA will be re-housed and re-employed in the new Financial Conduct Authority. Tracy MacDermott is already the putative Director of Enforcement in the new Agency, and no doubt many of her team will go with her!"


Why no prosecutions at Lehman Brothers?

  • anrigaut
  • 19/10/08 30/10/09
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  • Fri, 25/01/2013 - 22:25

A fascinating video to watch and ponder:
http://www.ianfraser.org/something-stinks-about-the-lack-of-prosecutions...

"This is the first interview that Chicago lawyer Anton Valukas has given since the publication of his 2,292 page report into the bankrutpcy of Lehman Brothers on March 11th, 2010. At that time, Valukas found strong evidence of financial and accounting fraud designed to deceive investors at the defunct New York-based investment bank. Valukas is surprised, especially given Lehman Brothers’ rampant abuse of Repo 105 to disguise its precarious financial position in the quarters ahead of its September 2008 collapse, that neither Lehman Brothers’ former chief executive Dick Fuld nor any other former Lehman director has been charged with fraud or related offences. ... "

Ian Fraser concludes his blog:
"The whole thing is sinister and astonishing in equal measure. The reason that no director of Lehman Brothers has been brought to book would appear to be that US financial regulator the Securities & Exchange Commission, which had a dedicated team inside Lehmans’ headquarters at 745 Seventh Avenue prior to the uber-leveraged bank’s collapse, knew all this chicanery was going on, and must therefore have given it the nod at the time. The SEC may therefore be complicit in the alleged crime and no less guilty than Lehman. Shades of the FSA’s hopelessly compromised position where failed UK banks like Royal Bank of Scotland and HBOS are concerned?"