City regulator defends taking no action on RBS
The City regulator has defended its decision to take no action against bosses at part-nationalised Ulster Bank parent Royal Bank of Scotland (RBS) but said new rules were needed to punish bankers who take too many risks.
Adair Turner, chairman of the Financial Services Authority (FSA), wrote in the Financial Times that ,while RBS chief executive Sir Fred Goodwin and his team had made bad decisions, they had not broken any rules.
He suggested that new rules could be brought in that would see bank bosses who take unnecessary risks struck off from working at financial institutions.
The FSA has powers to ban bankers who break the rules but Lord Turner proposed new regulations could be introduced requiring bankers to prove they tried to steer their business away from risk.
"Achieving a general shift in attitudes to risk and return may require that bank directors and executives are made subject to quite different incentives than those that are appropriate in other sectors of the economy," he wrote.
"It would for instance be possible to set a rule that no board member or senior executive of a failing bank will be allowed to perform a similar function at a bank unless they can positively demonstrate to the regulator that they warned against and sought to reduce the kind of risk-taking that led to failure."
RBS's acquisition of Dutch bank ABN Amro for €70bn (£59bn) in October 2007 was "highly risky but breached no regulation", according to Lord Turner's article in the FT.
The FSA cleared RBS and its senior management but warned that their competence would be taken into account in any future applications made by them to work at FSA-regulated firms.
The near-collapse of RBS, which is now 83%-owned by the British taxpayer, arose from a series of takeovers and losses in its investment bank.
After acquiring NatWest in 1999, Mr Goodwin led a series of takeovers, including a $10.5bn (£6.74bn) deal for US bank Charter One in 2004.
The City watchdog's supervisory investigations into other banks that failed during the crisis are continuing.