Terry Murden: FSA to be in the firing line along with RBS

THE Financial Services Authority should ensure that its staff are issued with tin hats tomorrow as it publishes the findings of its two-and-a-half-year investigation into the collapse of the Royal Bank of Scotland.

Criticism on a riotous scale is expected when it confirms that none of the directors face further enforcement action, that the prospectus to the controversial £12 billion rights issue in 2008 was not misleading and that it has not even fully investigated all the alleged failings at the bank. Equally damning will be the report’s self-criticism. The FSA is expected to admit to failings in its processes as the banking crisis developed.

A dose of humility will be welcome, though, if the regulator was part of the problem, it begs questions as to why this inquiry was not carried out by an independent investigator.

The 490-page document will, however, signal a sea-change of sorts in future behaviour. It is expected to recommend that future acquisitions by banks are more closely scrutinised by the FSA’s successor and that banks be required to put risk management controls ahead of maximising profits.

It is bound to reopen arguments that will reveal nothing new, though by making public at least some of the reasons for the bank’s failure it may encourage legislators to make it easier for those such as the angry out-of-pocket shareholders to pursue their cases for compensation.