SINCE THE DEMISE of the UK’s Financial Services Authority was announced by the coalition government in July, the banking industry seems to have developed a sudden affection for the institution that it has loved to hate for the past 13 years.
There is no doubt that the financial crisis exposed big defects in the FSA’s supervision of the banks and financial markets, particularly its complete failure to spot systemic risks building. Its own internal audit of its supervision of mortgage bank Northern Rock is a damning indictment of its approach.
The report found that there had been a lack of engagement with the firm; insufficient checks by FSA management to ensure the quality of supervision; inadequate resources dedicated to the task; and a failure to use risk information effectively to inform its actions.
However, many in the industry argue that the Northern Rock report is an...
