Integrity versus the FSA

There are moments to be proud and moments to despair. Unfortunately the FSA contributes more to the latter than to the former. 

The FSA released what must be one of the most pathetic statements ever last week about their investigation into the antics of the Board of RBS leading to the acquisition of ABN AMRO – click here for the full statement from the FSA.

If the FSA is supposed to give us confidence in ‘the system’, this report does nothing to help. After 18 months of investigation, no doubt costing millions (PWC would be embarrassed if it did not cost at least 7 digits) of tax payer money, we are not allowed to see the report. Why do it then? For the satisfaction of the FSA?

The report was done by PWC, one of the leading, if not the leading accountant’s practices. No doubt they describe themselves as something much more fancy these days, but they still do accounts. 

Many years ago when I bought my first business I used the C of PWC as advisor. I had no money so it was on the basis of no result, no pay. It took a year to do the deal and they stuck with us throughout. The partner told me later that by the time we had done the deal he would no longer get out of bed without our kind of fee up front. Ah well, times change.

PWC must have been involved somewhere in the RBS deal with ABN AMRO. So without wanting to infer that they would not be completely upstanding, they must have advised somewhere that what was being done at the time was correct. Slim chance of them finding something incorrect later. 

Besides, everyone I know recognised that it was unlikely that anything was against regulations. Too many lawyers and PWC-types involved for that.

No, the statement issued by the FSA is stunning in two respects. The first is that “This work considered if regulatory rules had been broken”. Apparently none were, but the report is not published so we have to take their word for that – the FSA’s word? 

This statement does show how useless the vast number of regulations of the FSA are if they are incapable of stopping a bank like RBS triggering the worst economic crisis in 70 years. In fact the report shows that the FSA failed in its main task – “market confidence – maintaining confidence in the financial system. PWC – another investigation?

The second statement is possibly more stunning. The FSA reports that “these bad decisions were not the result of a lack of integrity by any individual”.  

Ever since the bank was bailed out with a load of national debt we have read nothing but stories of the lack of integrity of Fred and his peers. Lack of integrity was the very foundation of the failure – unless pure unadulterated greed without any consideration for the consequences is considered integrity (according to Dictionary.com integrity = adherence to moral and ethical principles; soundness of moral character; honesty). 

The only thing I can think of is that it was not individual lack of integrity, but collective.

FSA – time to go?

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