RBS failures caused by poor decisions, says FSA

The Royal Bank of Scotland (RBS) nearly collapsed in 2008 because of poor management decisions, inadequate regulation and a flawed supervisory system, a Financial Services Authority report says.The FSA admits that its own supervision was “flawed” and “provided insufficient challenge” to RBS.

And it says RBS had too weak a capital position to proceed with the takeover of parts of the Dutch bank ABN Amro.

The £49 billion purchase took place at the height of the financial crisis in 2007.

RBS, which is now nationalised and 83% owned by the UK taxpayer, has cut 27,500 jobs since the beginning of the financial crisis.

The chairman of Royal Bank of Scotland, Sir Philip Hampton, admitted that it was “shocking” that the bank had to accept taxpayers’ money in order to avoid failing.

He said the approach of RBS’s previous management had been wrong, and huge changes had since been made.

He said the bank had restructured its finances “to get our financial platform where it should be, with strong capital and strong liquidity”.

Last month RBS reported pre-tax profits of £2 billion in the three months to 30 September, compared with a £1.6 billion loss in the same period last year.

The FSA report also says that in future regulators should be given greater powers to block takeovers.

Directors of banks should also put less emphasis on profit and more on risk management.

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