FSA’s attempts at an RBS whitewash take further knock … from WikiLeaks
December 14th, 2010
A cable published by WikiLeaks and the Guardian suggests that, contrary to the recent “review” (or “whitewash”?) of the Royal Bank of Scotland by the Financial Services Authority, there were corporate governance failures at RBS.
According to a US Embassy Cable dated September 11th, 2009 Lord Turner, chairman of the FSA, told State Department representatives that:-
Negligent boards of directors bore much of the responsibility for the crisis failing to provide oversight or check risky activity.
Yet, in its statement revealing it had “closed” its inquiry into RBS, issued on December 2nd, 2010, the Canary Wharf-based regulator said:
… the review concluded that these bad decisions were not the result of a lack of integrity by any individual and we did not identify any instances of fraud or dishonest activity by RBS senior individuals or a failure of governance on the part of the Board.
There is a definite incongruity here, which gives me further reason to wonder whether the FSA’s “review” into RBS, outsourced to the ‘big 4’ accountancy firm PWC, was in fact an attempted whitewash or cover up.
The embassy cable also revealed that RBS’s current chairman, Sir Philip Hampton, told visiting US politicians that the failure of the then RBS board, chaired by his predecessor Sir Tom McKillop, to question the Edinburgh-based bank’s €71bn purchase of ABN Amro represented a “failure of their fiduciary duty”. The cable said:-
RBS Chairman Sir Philip Hampton … acknowledged that RBS had made several enormous mistakes. Top among them was its heavy exposure in the U.S. subprime market and the bank’s purchase of ABN Ambro, which occurred at the height of the market and without RBS doing proper due diligence prior to the purchase. The board of directors never questioned this purchase, which Hampton termed a failure of their fiduciary responsibilities.
Hampton also revealed that RBS intended to retain its US arm Citizens Bank, “but will likely reduce the number of branches”. Hampton also “predicted the government would sell RBS off in several tranches over the next three-to-five years”.
Asked about fiduciary duty by the Guardian, Simon Morris of law firm CMS Cameron McKenna said:
“A fiduciary duty is about honesty. Shareholders give directors the power to run a company and a breach of that fiduciary duty is a reflection of a lapse in that honesty. A breach is also likely to be of interest to the FSA if it is an FSA regulated firm.”
Short URL: https://www.ianfraser.org/?p=3009