Weak FSA to blame for banking collapse – Rudd

SIR NIGEL RUDD, former deputy chairman of Barclays Bank and current Chairman of Barclays Wealth, has laid the blame for the collapse of the UK banking sector firmly at the door of regulators.

Addressing the annual Birmingham Forward Roger Dickens lecture, he said the Financial Services Authority had been ill equipped to deal with the crisis and unless action was taken to strengthen regulatory control of banks then problems would reoccur.

“A failure of regulatory policy led to the collapse on both sides of the Atlantic. It is vital that we learn the lessons to ensure this does not happen again,” he said.

He said that under the FSA, regulation became more of a science than an art and that judgement was the loser.

“The whole process became a box-ticking exercise and it failed to spot the flaws in the business models of both Northern Rock and HBOS,” he said.

Sir Nigel said his own bank had been wary of the impending storm and had realised it could not compete with the likes of Northern Rock in the mortgage market because of the high risk tactics it employed and the low cost offers it sold.

He said that as a public sector body, the FSA was simply ill-equipped to deal with the situation and the staff were not up to the job.

Any bank immediately spotting talent within the organisation snapped up the person involved, meaning the authority was constantly operating from a weakened position.

He reiterated his view that in order to strengthen the regulatory body, senior bankers should spend a certain period of time serving on the body.

“It would have the dual effect of embedding a risk management culture within the banks and, at the same time, making available to the FSA the top people who would eventually be in leading positions in our financial institutions,” he said.

Bankers would begin to recognise it as an established part of their career path but it would also make them more risk-averse, he said, leading to an end of the high risk strategies adopted by some of the banks in the period before the credit crunch.

“The UK should be home to the best-run and best regulated banks in the world,” he added.