Belfast Telegraph

Saturday 1 November 2014

'Poor decisions' caused RBS crisis

A report claims 'poor decisions' led to RBS entering a financial crisis

Royal Bank of Scotland (RBS) was brought to its knees by "multiple poor decisions" and its £50 billion "gamble" on buying Dutch bank ABN Amro, a damning report has confirmed.

A long-awaited Financial Services Authority (FSA) report blamed deficiencies in the management and culture at RBS prior to its £45.5 billion rescue and called for tougher rules to make bankers more accountable for their actions.

The regulator admitted it had failed to adequately monitor and challenge the bank, although it largely blamed the previous government for encouraging it to take a hands-off approach. The deal that effectively broke the bank - the takeover of ABN Amro - was carried out with inadequate research, the report added.

It said: "The decision to make a bid of this scale on the basis of limited due diligence entailed a degree of risk-taking that can reasonably be criticised as a gamble."

Business Secretary Vince Cable said he was seeking legal advice about whether any of the directors should face disqualification proceedings in the wake of the report's findings.

The report shone a light on the poor relations between the FSA and RBS, and said chief executive Sir Fred Goodwin's "assertive and robust" management style was flagged as a potential risk as early as 2003. He aggressively expanded the bank over his eight-year tenure, culminating in the disastrous acquisition of ABN Amro in 2007.

RBS management had been resistant to what they saw as unnecessary FSA interference leading to a clear-the-air meeting with Sir Fred in October 2004.

The FSA for its part admitted its approach was flawed and failed to challenge the management of RBS.

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