RBS report urges tougher rules on bank M&A, execs

Mon Dec 12, 2011 1:37pm EST
 
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By Steve Slater and Sudip Kar-Gupta

LONDON (Reuters) - Bank takeovers should face deeper scrutiny and directors be more accountable for their actions, Britain's finance watchdog said in a long-awaited report into Royal Bank of Scotland's (RBS.L: Quote) near collapse.

The Financial Services Authority (FSA) said in a 452-page report on Monday that RBS managers, like former chief executive Fred Goodwin, were most at fault in the bank's brush with bankruptcy, which was only averted by a 45 billion pound ($70 billion) government bailout in 2008.

The regulator, which is due to be broken up next year with much of its remit returning to the Bank of England, was also critical of its own actions and of former Prime Minister Gordon Brown for encouraging a "light touch" regulatory regime.

The report, like earlier investigations, said there was no prospect of successful legal action against former RBS executives as there was no evidence of criminal wrongdoing, although they had made a series of bad decisions.

But it said they could still be disqualified from being directors in future, pending a decision by the government, and suggested the law could be changed.

"The question I have raised for the future is whether the balance of the law is right," FSA Chairman Adair Turner told Sky News, arguing that new rules could ensure directors face personal financial consequences if a bank failed.

"The point about banks is banks are different. When things go wrong in banks you can screw up the whole economy rather than just shareholders' interests. We haven't recognized that enough in the past."

Peter Wright, a litigation partner at London-based law firm Fox Williams, said it was hard to reconcile the lack of punishment with the scale of RBS's failings.   Continued...