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FSA admits huge mistakes

Robert Peston | 16:13 UK time, Wednesday, 25 February 2009

My jaw was on the floor after the first 45 minutes of watching the chairman and chief executive of the Financial Services Authority give evidence to the Treasury Select Committee.

Lord TurnerTo say that Lord Turner and Hector Sants admitted there were shortcomings at the City watchdog in the years before they arrived would be a bit like saying Nelson Mandela oversaw a modest change in the constitution of South Africa.

They totally repudiated what they called the philosophy of the FSA prior to the near total collapse of our banking system in the autumn.

Lord Turner said that the FSA, as a matter of principle, did not question whether banks had appropriate strategies. It adhered, or so he said, to a free-market ideology - as preached principally by Alan Greenspan, at the time the world's most powerful central banker - which broadly said that banks would by definition behave rationally.

The only role for the FSA at the time - according to Turner - was to make sure that the structures, systems and processes of the banks were ticketyboo. So it verified stuff like whether there were a sufficient number of bodies in the risk-management department; or whether the right kind of management and risk information was being gathered and disseminated to the right people; and so on.

But it wasn't apparently proper for the FSA to challenge banks on whether they should be growing so fast in the mortgage market, or loading themselves up with collateralised debt obligations manufactured from toxic subprime loans, or funding themselves to an ever-increasing extent from the sale of mortgage-backed securities.

I'm so shocked that I've come over all cockney. All I can think of to say is "can you Adam-and-Eve it?"

And my own answer is "no", if I'm honest.

Sants made an equally gobsmacking disclosure. He said that in the past, when deciding whether someone was fit-and-proper to be a senior banker, almost the only consideration for the FSA was whether the candidate was a crook. But it didn't take much of an interest in whether the bank might be appointing a dunderhead, an incompetent, as a steward of our precious savings.

There is some reassuring news, however. Turner and Sants both insisted that it's all change at the FSA.

The watchdog is now crawling all over the strategies of the banks and examining where these institutions that are so central to our economy are heading.

And competency is now a formal requirement for the FSA for appointment to the board of a bank. The FSA has even decided that it's going to meet and interview candidates for top positions at banks, to verify whether they cut the mustard.

If you said "about time too", I wouldn't be at all surprised.

Here are two more shocking disclosures.

Turner conceded that neither the FSA nor the Bank of England had a formal, legal responsibility for maintaining the financial stability of the system.

And he also said that the FSA would be increasing the capital requirements for the trading activities of banks by several hundred per cent.

This means that the securities trading and investment banking activities of the likes of Barclays will become more expensive for banks, much less profitable. Banks will be deterred from engaging in the kind of financial engineering that led to the creation of all those poisonous, subprime-based investments.

But it also implies that - again - the FSA got it wrong to a mindboggling extent in another absolutely core area of its regulatory responsibilities.

Comments

Page 1 of 3

  • Comment number 1.

    Blimey.

    Talk your way out of THAT Prime Minister!

  • Comment number 2.

    Can anybody give a definitive answer to the problem of how many tins are required. I started collecting in November and am down to 70 after eating 10 tins as an experiment in determining consumption requirement. From this I decided 250 tins a month are required - 50 for me and 200 for my wife. I also decided against buying lots of fruit and vegitables as this is wasteful. Whilst required they don't fill one up and should be kept to a minimum. Same for tinned fish. We don't eat much tinned food at all but I can recommed M&S Irish Stew.

    Going to buy a garden water tank to collect water from the roof. Have aleady got 2 gas camping cookers from the previous scare in 2000.

    If we get over this my wife assures me we are going to need it all in 2012 anyway. This is the next predicted apocalypse. Something about the Earth and moon going out of orbit. This will result in many premature deaths. Earth will be reconalised by more spritually aware beings. Only those who are 'enlightened' will survive here on Earth - in what form I'm awaiting clarification. On the up side she says there shouldn't be any politicians or bankers. Maybe we drop them all on the moon which causes the out of orbit condition.

    So all I can say is we seem pretty doomed whichever way you look at it.

    PS Would the last blogger please put the lights out - especially the big one in that mushroom cloud.

  • Comment number 3.

    Mistakes they'll be ordered to make again once the furore is over

  • Comment number 4.

    Well no major surprises on this score then......at least some kind of an admission of incompetency from the very body designed to weed out the incompetents.So,there you go.Horse-bolt-lock-stable door.

  • Comment number 5.

    So what?

    Nothing will change - no heads will roll, the same broken financial system that has been abused by the people that still control it will carry on - to be abused once again - what is the point of all this bread and circuses? Where's the change? This is just boring now.

  • Comment number 6.

    Did this start in America too? Did Brown set this system up or not?

  • Comment number 7.

    If my recently built house collapsed soon after I had moved in because the design was not sufficiently robust to withstand its first winter wind, I would be seeking substantial damages from the architect. Please will someone remind me of the identity of the individual who constructed the regulatory system, which has proved so obviously unfit for purpose, in order that I may seek appropriate reparations? I take it from all the comments made by our Prime Minister that it was somebody in the USA . . . . .

  • Comment number 8.

    "About time too" was at least five years ago. I'm afraid that the FSA issuing "reassuring news" at this stage is not remotely reassuring.

    Big jobs, big titles, big salaries, big pensions, big perks... and failure, failure, failure.

  • Comment number 9.

    Is anyone really surprised that people put in charge by NuLab turn out to be pretty poor.

    NuLab know how to pick all the "right" people to do their "reviews" and come up with the "right" answers to suit the boss.

    Whenever there is an "independant" expert put in charge one never doubts the outcome.

    As i said..is anyone really surprised.

  • Comment number 10.

    Good stuff, RP.
    Sock it to 'em.
    Thats pretty much how we all feel about the FSA.
    It needs to be put in the pay of HMG, not the banks,

  • Comment number 11.

    Brown's fault. He set up the FSA but didn't bother to make sure it was doing a proper job. He also insisted on the light touch approach..

    He's got to go.

  • Comment number 12.

    There is yet another big issue to be addressed before we can consider banks as (almost) morally sound businesses: the issue of off-shore banking and tax havens and the trillions of dollars, euros, francs and pounds hidden away in Switzerland, Liechtenstein, Bermuda, Cayman Islands and many other similar places.
    Now is the time to recover those looted trillions. Where are the morally upright political leaders that will 'serve the people' and not the looters and their well paid middle men (e.g.banks) Where are the politicians willing to enforce laws to bring those trillions back for a productive use in credit crunched societies?

    Where are the true global leaders with a moral compass that will use this moment of opportunity to finally unmask the
    impunity of those banks who helped to hide away trillions, with no questions asked. Can we expect Gordon to take this decisive step forward, to show global leadership? You could do humanity a great favour Robert, if you would call for a worldwide re-patriation of those looted and untaxed trillions.
    Finally, a quote from Joseph Stiglitz, Nobel Laureate (2001)
    in Economics:
    ""You ask why, if there's an important role for a regulated banking system, do you allow a non-regulated banking system to continue? It's in the interest of some of the moneyed interests to allow this to occur. It's not an accident; it could have been shut down at any time. If you said the US, the UK, the major G7 banks will not deal with offshore bank centers that don't comply with G7 banks regulations, these banks could not exist. They only exist because they engage in transactions with standard banks."

    Let's get serious and have a long overdue, real global banking reform, for the benefit
    of the majority of the world population. After all governments are there to serve the people, not the elite?

    Also, my fellow commentators,
    I ask you to help raise awareness for these issues on other blogs. This could help stimulate a wider mainstream discussion and, hopefully, one day to some real change.


  • Comment number 13.

    So nobody was really looking after the shop, were they?

    So in 1997 when all the regulatory stuff was removed from the Bank of England, which had been doing it more or less successfully for three hundred years by then, it was turned into a tick box regime. Whose idea was that?

    Well, we all know the answer to that one. So the tide encroaches upon the door of No 10 a bit further.

    I am a bit bothered though that a lot of people were paid an awful lot of money just to tick boxes. Is this usual in the public sector these days? We need to be told.

    It used not to be like this but I accept I am old-fashioned. Perhaps us old-fashioned people should be allowed to run the country.

  • Comment number 14.

    Now I've read the post I find it hard to believe your so surprised.

    Everything is jobs for the boys - let's get some money!

  • Comment number 15.

    Finally it seems we have had the first meaningful admission of fault, with the FSA hopefully having learnt from its mistakes which it sees to have fairly brutally identified. (and only 20 Months into the implosion!)

    Can everyone else (BoE, Treasury, ministers, banks, and those who borrowed too much) now do the same or is that too much to ask?

  • Comment number 16.

    So we are starting to see some frame work for the New World Order.... according to the FSA

    From this seed I am hoping that the Gov will now work out what it is they are trying to recover too.

    There is obviously never going to be the money available that there was in 2006/7 for mortgages and credit in general.

    So where in the range from - only spending what we earn - through to - spending what we earn plus the 100’s of millions we borrow will a line be drawn....

    Only when we know this will we have any idea where the bottom of this recession is..... and what to expect on the other side.....

    I’m a little fed up with the presumption that the recovery will take us back to the ridiculous consumer levels of 2006.... IT WON’T

    Well done FSA - more saving and less borrowing seems to be the foundation of a workable system........ it was a hard lesson, but you are learning!!!

  • Comment number 17.

    During the past few years, the British government was warned on many occasions that the burden of consumer debt in the UK economy was too high, and that the average mortage to buy residential property was 7 or 8 times average income.

    The IMF, among others, repeatedly pointed this out. In 2006 the IMF stated that UK house prices were too high.

    Gordon Brown just kept saying it was no problem, because interest rates were low and households "could afford to service the debt".

    To say the FSA was asleep is not the full story........our government was also in denial.

  • Comment number 18.

    Who was it that gave the FSA the responsibility to oversee the banks?

    Who should have put legislation in place to ensure that proper regulation - along the lines now evisaged - was followed?

    Who was the chancellor who gloated to his EU and G7 counterparts that the UK's financial system should be adopted across the world?

    Answers on a postcard to Culpability Brown.


    Robert,

    Without highlighting the above points you are only covering half the story. Although the Bank of England may not have had formal responsibility to maintain stability it is certainly an integral factor of any central bank and I feel that some curbs would have been put on the banks before the wheels came off.

    Eddie George apparantly warned Gordon Brown of the risks of taking bank regulation off the BoE - isn't your role now to bring to task the person responsible for the mess you detail in your blog?

  • Comment number 19.

    NE's are supposedly on the boards of banks to protect the interests shareholders. In fact in my experience most get their positions through back scratching and the old boys network.

    Isn't it time the FSA appointed NE directors to the boards of retail banks to protect the interests of the customers (ie depositors) ?

    Although this is a radical suggestion the retail banks are so central to the UK's political stability it's madness not to have some greater measure of control. To my mind its like the government not having proper control of the army.

    If the retail banks don't like it they can become investment banks instead.

    And I think there should be separation between the retail and investment banks, like many people have called for. Then we can let the investment banks go to the wall when they foul up rather than having to save them because Joe Public will riot if a bank goes down.

  • Comment number 20.

    Three cheers! They're giving that stable door a whacking big slam!

    Part of the reason for the historic hands off, innovation-fostering approach of the FSA was that it realised that it did not have the skill set to regulate the detailed activity in the market, and that doing so would impede creativity, and undermine the competitive position of London vs other financial centres. In the current climate creativity and innovation are dirty words and there is unlikely to be a race between financial centres to offer the most lax regime.

    Greenspan thought shareholders would act as the best regulator on financial institutions. The FSA took his lead. Now Greenspan is shaking his head in disbelief as he realises he was wrong. Are the FSA now saying that the right people to regulate banks are "good bankers"? Because shareholders can't regulate banks, and regulators (much as they may crow now) can't regulate banks either.

    Arguably all of this mess can be put at the feet of a few decisions: relaxation of capital adequacy requirements, refusal to regulate or even require transparency in derivatives. Who took those decisions? Not the bank bosses the FSA is proposing to vet. But the government regulators themselves.

    Quis custodiet ipsos custodes?

  • Comment number 21.

    "Light touch regulation...."

    HA!

    *shakes head*

  • Comment number 22.

    Well, at least the USA continues its reputation of doing its deeds on a massive scale: FSA didn't stand by and let a Bernie Madoff run an obvious 50 billion scam in plain sight.

    As far as I have read, only one head at our Securities and Exchange commission has rolled, and that one was a voluntary resignation of someone hired in 2005.

    The economy here suffers to great extent because trust has been lost. The only way many of us can deal with politicians and the great and good of the business world is as follows: 'If his lips move, he's lying!'.

  • Comment number 23.

    Of course, what's worse is that things will - as a result of what's going on - be hammered into some sort of shape at last... only, in twenty or thirty years (if we're lucky, five-to-ten if we're not), it'll all be swept away by some idiot as "too onerous" and "out of date".

  • Comment number 24.

    Not surprised. Are these really revelations?

    To me the FSA always was just another waste-of-space quango.

    Why wasn't the Govt checking that the FSA were being effective in their role?

    Surely these "revelations" serve to prove that the Govt was not just asleep at the wheel, but not even qualified to be at the wheel in the first place.

    When are heads going to roll?

  • Comment number 25.

    Your surprise can only be that they have confessed so fully, Robert - because what they have confessed to was evident for all to see many months ago.

    What they've said is really significant, because this 'FSA philosophy prior to the collapse' was no more and no less than what Brown (and Blair) dictated. They always had it in their power to do what they are now going to do.

    We are beginning to to get to the bottom of things.

  • Comment number 26.

    Yes, this is horrific, if unsurprising.

    However, just think back 3 or 4 years and imagine the FSA announcing they were introducing these checks then. Certain papers (lets call them DT and DM) along with the Opposition would have howled and screamed about such "Socialist, interventionist" policies, which interfered with the market.

    Does no one else remember the pledges by successive Opposition leaders to wage war on "red tape", which was considered such a heavy cost to our successful financial industry? Wry laughs all round, I think.

    I'm betting the same papers will shamelessly castigate the FSA for not doing this earlier! Oh, and it's all that Gordon Brown's fault!!!!!


  • Comment number 27.

    about time too :o)

  • Comment number 28.

    I find these admissions astonishing. You can't break wind in Insurance without passing an FSA check, and yet the banking industry appears to have been one big box that was automatically ticked every year.

    But it's alright now, because the FSA are going to reform and become a lot tougher on the banks...

    Incompetence on an apoplectic scale, get them all out, now.

  • Comment number 29.

    We should not be surprised by the announcements in today’s Treasury Select Committee meeting that the FSA did not adequately control bank’s strategies. Who could have expected staff at the FSA to tell banks that they must adjust their strategies because the regulator is concerned with particular developments in financial markets? Bank shareholders would have been appalled at such action when banks all over the world were pursuing similar growth strategies and no doubt the lawyers may have become involved if the regulator had forced such action on a particular bank. Although the FSA intends to meet bank’s board members on a more frequent basis going forward to discuss strategic plans, I cannot see how the FSA will ever be able to force banks to alter their strategies unless the FSA is provided with a legal mandate permitting this. They do not have this mandate at the moment. Although I believe that they should have such a mandate, if they had had this mandate previously no doubt we would have been suggesting that it was excessive red tape and another example of a “nanny state”. Such beliefs were endemic of the previous economic state. We have to accept that we are now in a new financial environment and that banks must now accept their societal responsibility. The regulator is provided with the responsibility of supervising financial institutions on behalf of society (because it is too expensive for each of us to do it on our own) and so the legal foundations to enable the FSA to supervise banks strategies should be instigated. May be this should include the FSA having a non-executive directorship in each large UK banking institution?

  • Comment number 30.

    "The watchdog is now crawling all over the strategies of the banks and examining where these institutions that are so central to our economy are heading.

    Never mind the horse and stable door, this is a case of closing the lion enclosure door after the entire population of a near-by town has be mauled to death...

    As you say Robert, jaw dropping, but lets not just blame the FSA - the Greenspan era was during the Thatcher/Major period in the UK, the Treasury Select Committee should be compelling both Thatcher (or members of her cabinet at the time) and Major to explain what they were doing.

    As was said about nationalisation, it seems to me that bank regulation will be 'Back to the '70s' also, deregulation and the big bang has been a very expensive mistake.

  • Comment number 31.

    So, what strategies was Adair Turner using as vice chairman of Merrill Lynch Europe where he operated until 2006?

    And what relevant qualifications did he have?

    And for Hector Sants this comes from the FSA web-site

    'He joined the FSA in May 2004 as Managing Director, Wholesale and Institutional Markets at the Financial Services Authority. Hector had responsibility for all regulated markets, the related infrastructure such as clearing and settlement, the operation of the UK Listing rules and regulation of firms or groups which conduct primarily wholesale or institutional market business between professionals.'

    And taken direct from the 2000 Act

    The regulatory objectives

    3 Market confidence
    (1) The market confidence objective is: maintaining confidence in the financial system.
    (2) “The financial system” means the financial system operating in the United Kingdom and includes—
    (a) financial markets and exchanges;
    (b) regulated activities; and
    (c) other activities connected with financial markets and exchanges.

    Well where is market confidence? They had the power to make regulations. Why didn't they do it?

    Apologies now? Puhleeese

  • Comment number 32.

    How can Brown survive this??
    After all the FSA was his invention, his baby.
    Brown created the regulatory structure which has failed us.
    Brown trashed our pensions and sold our gold reserves at rock bottom prices.
    Brown must be held to account for his role in this unfolding and unbelievably expensive mess!

  • Comment number 33.

    Surely it should not be very surprising that the FSA was as out of touch as the bankers in regards to what needed to be done to stave off financial collapse. They are all mainly former bankers after all.

  • Comment number 34.

    "when deciding whether someone was fit-and-proper to be a senior banker, almost the only consideration for the FSA was whether the candidate was a crook."

    Was that considered to be a plus or a minus?

  • Comment number 35.

    Remind me who set up the FSA in the first place? And gave it its non-regulating 'philosophy'?

    It wasn't a certain G. Brown, was it?

  • Comment number 36.

    Cor Blimey; I guess it's a start, but I can't help but feel suspicious of the apparent Damascene conversion of these people

    Tea leaves will always promise to go straight if the police will just drop the charges and let them go, but they pretty much always turn out to be Dunlop tyres

    the FSA, UK govt and City of London etc may be feeling that they need to be seen to be introducing better regulation before someone else does it for them

    it appears that it might already be too late for that tactic though, what with the EU Commission report today recommending much tougher Europe-wide regulation

    if the EU reforms are implemented then it really could be another nail in the coffin of the City of London as the UK's biggest generator of trade surplus

    either way it looks like the party is over in the City for the foreseeable future

    which is good, but we'll need to think of some way to replace all that 'economic activity' swapping derivatives etc with something a bit more real and respectable which is also of high value!

    ideas anyone?

    perhaps we should ask someone really clever like that Gail Trimble; she would be welcome to sail with me and chart a safe passage through the treacherous Goodwin sands

  • Comment number 37.

    Hi,
    Just how much did we the Taxpayer pay the FSA for there inactivity on our behalf?

    Who monitors the FSA, is it the Boe or the treasury, or maybe the bankers themselves?

    Perhaps they, the FSA believe that they are so important that they don't actually need to be monitored.

  • Comment number 38.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 39.

    Yep, here we go again, someone else can be blamed and coincidentally and conveniently he's from the US - Greenspan.

    So let's get this straight to close the case: the US and Greenspan made UK banks sell 125% plus UK mortgages to UK customers and their delaings gave a UK bank the reputation of lender of last resort to real estate developers and venture capitalists and buyout funds (forthose out of the know, HBoS).

    But if Greenspan, who was knighted by Brown I think, is to blame, how come that Bllomberg today carried an incisive article today on the soundness of Canada's banking system. Not a penny aid has been received by the canadian banks and dare I tell you where Canada is: IT BORDERS ON TH US. So Canada's banks are sound and the UK's have all been bazooka-ed by the US.

    Somehow this doesn't really add up.

    PS What about the 28 or 29 cases similar to the HBoS dossier that the FSA was looking at when it thought that HBoS was sailing a tad close to the wind. The fact that the FSA had so many dossiers on its desk certainly doesn't chime with what Tuner and Sants are trying to convey. An investigative reporter seems to have his work cut out.

  • Comment number 40.

    I guess that reflects the philosophy inherent in deregulation, one which is still held by a lot of conservatives. Why bother with this agency if it was mandated to fulfill such a limited role?

    Past banking problems in the United States and elsewhere should have provided us with a view of the iceberg. Our government and regulatory bodies should have heeded the warnings that these provided the importance of the banking system to the free market economy and to the instabilities inherent in a laissez-faire attitude.

    That said it will be important to recruit very competent individuals to regulate this industry, if they are actually to be given real power. Otherwise we could be just transferring the power from one group of nincompoops to another.

  • Comment number 41.

    Apologise as much as you like, FSA, you shat on every complaint you ever had, and as a previous analysis of mine showed, you did very little in return for hefty wadges of dosh.
    The problem is, the new team is simply a repeat performance of the old team's problems, same set of insiders, same game, so why should be believe things will be any better now than they were then?

  • Comment number 42.

    And as I've also shown, the entire regulatory system got unwound by Sir Philip Hampton, so don't stop here, keep going and sort the lot.

  • Comment number 43.

    The real problem in this whole mess is the 'Greenspan Put'. Doing whatever it takes to prevent a downturn is a patently false assumption. Not allowing central banks to price capital below reasonable levels would be a much safer way of avoiding a repeat of these times.

    If we had suffered mild downturns in 2001 and 2004, then banks would have priced risk better. As they would have been exposed to it.

    Nonsense about investment in property - traditionally a poor asset class, would not have gained credence, with a few downturns.

    If we tried to prevent winters and make permanent summers, we would expend a lot of hot air for no gain. This inquisition is pretty much that. The waste of a lot of hot air. We now owe a lot of money and have to start repaying it. Roll your sleeves up boys.

  • Comment number 44.

    ...and the architect fo the FSA was one Gordon Brown who , of course, has saved us all ...

    except from himself.

  • Comment number 45.

    Speechless! and I'm not usually lost for words.

  • Comment number 46.

    Now, coming from someone who runs a small business in the "real economy", I can only observe that as the Government places banking and the operations of the City of London so highly amongst the importance of business, they have been either stupidly incompetent or negligently negligent.

    The whole country will pay for this foolhardiness, yet Flash still harks on about a "global financial crisis" and people continue to listen!

    How soon before the country wakes up to this?

  • Comment number 47.

    By rights all of the staff employed at the FSA since its inception, should be sacked without compensation or delay. They were not and are not, fit for purpose.

  • Comment number 48.

    So its 'mea culpa' for everyone at the FSA then.

    Well, I should think so too.

    But do you detect any movement, Robert, on the issue of the bankers having 'captured' the FSA via the FSA recruiting those very same people to make up its board?

    They're all a load of insiders really - is it going to continue to be this cosy cartel of just ex-bankers who will get appointed to regulate their mates?

    When Adair Turner says that this is a revolution I think we should be very sceptical. This sounds to me like a case of wishing only to move an inch.

    His paper (www.fsa.gov.uk/pages/Library/Communication/Speeches/2009/0121_at.shtml), as you remarked yourself, was a very accomplished explanation of what has happened - but it points to him trying to solve everything via the route of the FSA regulate more and more.

    Some more regulation is indeed necessary, but they key thrust of new legislation should be to force all financial institutions to be more transparent i.e. disclose a hell of a lot more information into the public domain.





  • Comment number 49.

    Apologies to bother everyone with a follow-up to my previous comment but what Mr Peston writes above really seems odd.

    When HBoS with Crosby were investigated a few years ago, there were close to 30 of similar dossiers on the FSA's desks. That does noy imply that the FSA hardly looked at what was going on, which Turner and Sants seem to have said today. It implies that the FSA stepped back from taking unpopular decisions and taking appropriate steps following its findings; it did not order management to step down or change its ways. It implies the FSA was too chummy with its subjects, perhaps because some of the movers and shakers in the banking industry were on the FSA's board, like Crosby.

    Parliament and reporters should sound out some of the FSA's junior staff who were doing the hard work of fact finding. Perhaps that can help shed some light on whether the FSA knew that some banking business models were dangerous but were left untouched by the senior, sanctioning FSA staff.

  • Comment number 50.

    It adhered, or so he said, to a free-market ideology - as preached principally by Alan Greenspan, at the time the world's most powerful central banker

    Would that be Sir Alan Greenspan. The bloke that Brown got over to give Darling little chats and pointers on how to be an effective custodian of the economic health of the nation like me, Gordon Brown? A bit like Sir James Crosby late of this parish?

    Time for Brown to get Hornby and Goodwin back in the dock again. More show-trial and ritual humiliation. This Holt bloke and Greenspan and Crosby are beginning to draw folks attention a bit close to the real culprit here.

    PS what happened to Nick Moore since he alleged he had documents giving chapter and verse on Browns complicity and culpability? In a safe-house. Already slit his wrists? Did I miss the big story?

  • Comment number 51.

    The banks have said sorry

    The FSA has agreed they made mistakes

    The BoE has said "they didn't see it coming"

    Isn't it about time for Brown to "Pony Up" and take ownership for his mistakes whilst Chancellor and PM?

    After all Brown set the policy for the FSA and gave them all the Rules which they ignored...and who was supposed to check that his cosy club was actually doing the work? Must be Brown.

    Will we now get the Brown apology, a stage managed exit, and a supposed revitalisation of the Labour Party under a new leader who has stood against what Bliar/Brown stood for?

  • Comment number 52.

    The naivity of these senior figures is staggering. Why should banks "by definition behave rationally"? I suspect the real answer would be along the lines of: because banks are run by jolly decent and honourable chaps in suits who are members of the same golf club and wear the same tie as oneself.

    And as for checking that senior bankers were not crooks - well, experience shows they couldn't even get that right either.

  • Comment number 53.

    The FSA was, and is too much of a cosy club of partisan players nurturing their own pensions. We need a truly independent and critical body. That is the challenge.

  • Comment number 54.

    not sure, but tea for the BBC moderators seems today to have been accompanied by some very heavy scones

    good evening!

  • Comment number 55.

    If the FSA had spent half the time they spent on Anti-Money Laundering procedures and "Know Your Client" on credit controls and liquidity stress testing instead, we would have had much better early warning of the crisis, even though it might not have been averted.

  • Comment number 56.

    Not entirely surprised with the testimonies from todays meeting.

    It is truly mind bogggling that "the policeforce" of the financial services system did not ensure that banks had adequately qualified personnel or understand the mechanics of the complicated investment vehicles being used.

    This has to change and become transparent enough for the man in the street to understand.

    I would not be able to fly a plane or operate a lathe without the appropriate training, supervision and health and safety process.

    It would seem however that I am suitably qualified enough to wreck thousands of lives if employed in a bank.

  • Comment number 57.

    Come on Robert..

    How can you be shocked by these somewhat not very revealing revelations...

    Let me paraphrase.... It wern't my fault guv, it wern't my job to keep an eye on what the banks were doing..

    So now let me summaries what we have learned from the investigations and navel gazing so far..

    Politicians - It wasn't our fault
    Government- It wasn't our fault
    Bankers- It wasn't our fault
    Estate agents- It wasn't our fault
    TV Property shows- It wasn't our fault
    Regulators- It wasn't our fault
    Remortgagers- It wasn't our fault
    Self cert liars- It wasn't our fault

    Now I wonder why with this formidable intelectual think tank we havn't managed to get ourselves out of this mess...

    Just like alcoholics.. Until they recognise they were the problem, there will be no solution..

    Me for prime minister!

  • Comment number 58.

    Hello Mr Peston,

    I hope that you have recovered.

    So who actually gave the FSA their brief?

    Was it the then Chancellor GB who as PM is now running around saving the world with his side kick Darling throwing billions in to the banks laps?

  • Comment number 59.

    so that confirms it...it was all down to GB!

  • Comment number 60.

    Well great, someone has begun to admit, "we got it wrong".

    But the main issue is not just what is going to be done about it, but also how quickly?

    The clock is ticking fast.

    More and more people are suffering worse and worse consequences of this downturn and more and more people are losing hope of ever earning a fair days wages for a fair days work, or of having a reasonable quality of life, or of having a worthwhile pension, or of ever seeing a stock market that they could reasonably invest anything in again.

    Many are out of work, and many in work that is well below their training, skills and abilities ... but "its a job".

    (For some, it's already too late, things won't recover sufficiently within their working lives to even begin to offset what they have already lost).

    Something has to be done pretty quickly to rebuild trust and confidence in banks, the wider financial industries, the regulators and, indeed, the politicians.

    Or the consequences and sequels will be even more tragic for even more people.

  • Comment number 61.

    There is a serious question here, but it is not one of "light touch" regulation, as opposed to more heavy handed approaches. Essentially, what needs to be addressed is whether regulators had an eye on strategic issues in the market, as opposed to viewing regulation as an instiution by institution task. What Lord Turner appears to be saying is that when banking regulation was taken away from the Bank of England and given to the FSA, no one thought about how you would monitor and address system wide, strategic issues within the regulatory framework. That is a failure by the politicians and civil servants (particularly Gordon Brown and the Treasury) to think carefully about what systems were previously in place and whether their new creation provided sufficient protection. I recall that Eddie George opposed banking regulation being moved from the Bank to the FSA for this very reason, but was overruled by Gordon Brown. We need to think very carefully about how we address this issue, which is about the fundamental design of the system and not about how easy or not regulators were on the banks under their jurisdiction.

  • Comment number 62.

    strange moderation here post 52 is the first to be moderated???

  • Comment number 63.

    Of course, now that what is probably required is the 'light-touch' regulation that fostered the admittedly unsustainable 'boom' in the first place, the FSA is clamping down so hard on the banks that theyare too terrified to lend to all but the most triple A of credit rated borrowers i.e almost nobody.

    The Americans have a good phrase for this kind of activity -'Ass-Backwards'. The government wants the banks to lend more money, however they also want them to be much more circumspect in their lending practices - ergo the FSA baring its claws for the first time, but actually now getting in the way of the banks doing what the government wants

    'Oh what a tangled web we weave...'

  • Comment number 64.

    1 hour, 49 comments and no moderation! Perhaps Lord Turner could suggest a radical overhaul of the moderation process! Surely only a few need detailed moderation which could be held back. whilst others are posted straight away. There could of course be a much more sinister reason why it is taking so long as opposed to just sheer incompetence-bit like sorting out the financial system?

  • Comment number 65.

    28th of March 2009

    http://www.putpeoplefirst.org.uk/

    I have decided to travel 200 miles to be there.
    Might make a difference than writing in a blog.
    Who knows?
    But this is just getting crazy.

  • Comment number 66.

    But it also implies that - again - the FSA got it wrong to a mindboggling extent in another absolutely core area of its regulatory responsibilities.

    I'm prepared to bet that it followed its 'core responsibilities' to the letter. It's just that the 'core responsibilities' that you might imagine would be the remit of the FSA and what they actually were as handed down by the Maximum Idiot would diverge wildly. Just like the 'independent' BoE's remit on inflation.

    You might accept that the BoE would have a remit to target inflation. You might also imagine that inflation target to not be too concerned with a 2% increase in the price of bread or memory chips when houses were going up (as they did in the year to July 2004) by 20%. But again the layman's understanding of what constituted a significant inflation figure and Gordon Brown's were clearly at odds. The more cynical might even question why the inflation measure was changed from RPI (which at least had some housing component) to CPI (which doesn't).

    I don't know what is stopping y'all at the BBC from pointing the finger at the real culprit. 72% of the voters have it figured out already. Why not give the other 28% a little push in the right direction eh?

  • Comment number 67.

    Whilst I was posting the last blog #51 has been printed but nothing before and after1 Some sort of technical hitch with my computer-or something more sinister? Help!

  • Comment number 68.

    love the comment about 'fit-and-proper' where almost the only consideration was whether the candidate was a crook! what can this mean?

  • Comment number 69.

    If Lord Turner says that neither the FSA or the Bank of England had responsibility for maintaining the financial stability of the system, surely that only leaves the Treasury?

    In this season of public apologies, can we expect one from that direction?

    No, of course not. Gordon Brown does not do "mea culpa".

  • Comment number 70.

    Surly the 80/20 rule should be that those in charge should be trained in "banking".

    A few years ago my local Nat west employed a BHS Manager to run a big ranch. He did not last long.

    Just out of curoisity are the political parties distencing them selves from these bankers. They must need to if they are going to have an unbised approch to what disipline processes need to be taken.

    At the moment if you steal a mars bar from a shop you could get a criminal record; theres a lot more involed here!!!!!

  • Comment number 71.

    "What exactly were the FSA doing before the crisis? "

    Easy one that, just think of another acronym using the letters FSA.

  • Comment number 72.

    Logic would suggest it is time for a damn good clear out in many areas including HMG. And please those who post to the effect everybody is just doing a spiffing job. Please dont bother. In how many ways do you need to be told it wasnt the case.

  • Comment number 73.

    Robert, are you really surprised? How many times did we see programmes showing Self Cert mortgages being roundly abused yet from the FSA hardly a peep... If they couldn't regulate mortage brokers effectively they were hardly going to be making more of an effort with banks.

    As to regulators, well I have the pleasure of dealing with another regulator in my job. The target of the regulation spend heavily on pr, government relations and managing the regulator to very good effect.

  • Comment number 74.

    I am surprised you are surprised Robert.

    The FSA lost the plot many years ago when it turned a blind eye to the explosion in off balance sheet activities and changed its mission statement from its legal requirement to maintain orderly financial markets to one of promoting London as a trading centre with flexible and accommodating regulation. The regulators had become fans of the deal makers and felt they were part of the money making system. They were that too, to the extent they allowed London to become the trading centre for any off the wall derivative dreamed up by merchant bankers who could not believe their luck.

    Why on earth Hector is still there having overseen the developing fiasco and supported every misguided change in the regulatory box ticking regime is beyond me. He was of course supported by Gordon Brown, who had more form for off balance sheet funding structures and relableing government liabilities than the bankers, so Sanz probably thought fiddling figures was de rigeur.

    I hope Lord Turner is ready to fight for a global return to full on-balance sheet accounting with capitalisation related to fully weighted liabilities. The whole Basel I and II structure encouraged falsification of risk calculations and propagated a false impression of "at risk" positions. There should be full weighting of good and less good assets and liabilities to allow for misjudgements of risk, otherwise the spread of risk is distorted and the "capital insurance" is inadequate when most needed.

    This is not rocket science and if any formula applied needs a rocket scientist to translate it, it is wrong and by definition not transparent for regulators or the public who are the mugs picking up the bill.

    Lets see the smoke screen of brilliant financial wizardry for what it has always been. Smoke and mirrors.

    If the markets were so refined for derivatives et al, it should be impossible for bonuses of the size paid out to be earned by trading. The fact is all the billions removed in salaries and bonuses have come out of savings and investments which have not shown real value growth for all the past decade and beyond.

    In two generations, The City culture has changed from providing a service to clients to fleecing punters at every opportunity.

  • Comment number 75.

    Kudos to poster #51 who seems to have by-passed the moderation queue of posts 1 - 50 entirely. What special powers do you have? And where can I get them?

  • Comment number 76.

    It's hardly jaw dropping stuff.

    - after all Private Eye has referred to the FSA as the Fundamentally Supine Authority for years.

    Turner and Sants confirming that the FSA were virtually useless for the purpose they were supposedly created for can hardly have been a surprise.

  • Comment number 77.

    The whole banking system as well as the country has fallen to bits.

    But here we have some character saying don't worry we'll get it right next time.

    If only we were all in a situation where we could guarantee we would get it right next time what a utopia we would live in.

    What I also heard him say was that those from above had told them they wanted only light touch regulation which looks as if they meant no regulation at all judging from the chaos we now see.

    The FSA should be scrapped completely for the useless quango it is and responsibility should go solely to the Bank of England.
    At least we would know who to blame'

    They'll also have to make sure they have the right people there first though.

    This is all looking like a game of musical chairs or 'passy the parcel'

    So many different characters involved and no one really in charge willing to take any blame.

    Could it be that the only one who really had any say was the PM himself?





  • Comment number 78.

    But it didn't take much of an interest in whether the bank might be appointing a dunderhead, an incompetent, as a steward of our precious savings.

    Rather like the Labour Party and the electorate in that respect I suppose.

  • Comment number 79.

    Mr Mod

    How is it that only one post out of 72 is readable and that is number 51.


    StrongholdBarricades at 51 - I am most impressed please let us into how you do it.

  • Comment number 80.

    Pleading incompetence rather than the other thing...

  • Comment number 81.

    It comes as no surprise.

    When as internal auditor I recommended that criminal record checks be made on employees management response was

    The FSA only suggest it would be a good idea so, as it is not compulsory, we do not accept the recommendation!!!!

  • Comment number 82.

    Good to hear some hands held up, honest talking and corrective action. So what was actually on the job description of the FSA staff pre this time?

  • Comment number 83.

    Civil servants are rarely rewarded for success, and often penalised for failure. Therefore they resort to box ticking and arse covering. We need the FSA to behave like private detectives. Those FSA staff who are able to produce evidence of wrong-doing by those they regulate should be well rewarded. If they start with the assumption that those they regulate are guilty of crimes unless they can prove they are not, then the FSA will not go far wrong.

  • Comment number 84.

    Come on you guys, give Gordon a break. Ok he was the architect of all this, but you know everyone makes mistakes and it is not easy being a failed radical socialist with no inate instinct for capitalism and its little ways.

    And look at the man's obvious integrity elsewhere in government. His passionate backing of bombing Baghdad which reached such Churchillian heights Mr Sraw has decided we better no see the record of, lest we collectively come over all giddy and have to fight the urge to march on Downing Street and show our Evita style devotion to this great, great leader.

    Gordon the musical is what we want.

  • Comment number 85.

    two hours for moderation
    come on chaps and chapesses
    why does strongholdbarricades get through?

  • Comment number 86.

    BLAH BALH BLAH the usual we were not to blame, we did nothing but award ourselves bonuses for not doing anything,

    Guess what! i reckon the UK public know what oyu didi last summer and the summer before, and for that fact all the winters also, and everyone connected with the banking problems should be sacked and investigated by the police not given bonuses and be given a chance to say "we did nothing wrong".
    Bankers your time has come, and i doubt the UK or the world will ever trust you again!

  • Comment number 87.

  • Comment number 88.

    Ok we all know by now it's all broken, enormous mistakes have been made.

    The real question

    How do we fix it ?



  • Comment number 89.

    And perhaps the FSA objective about maintaining confidence was considered moot since there was according to one G Brown no more boom and bust.

    Or perhaps maintaining confidence was all about the traditional approach of boom and bust

    Sad mrsbloggs13c2 that I am, I have scanned the 2000 act on more than one occasion. Since when do acts of parliament have objectives in them??? Its a bit to easy to draft legislation like that, isn't it?

  • Comment number 90.

    Robert

    Any news yet on what the government is doing in the debt bond market?

  • Comment number 91.

    are the moderators playing games? i have never seen such moderation...

    In damning evidence to the Treasury select committee, Financial Services Authority chairman Lord Turner said there was clear 'political' pressure not to question the business models of banks such as Northern Rock, HBOS and Bradford and Bingley....

    the game is up Gordon, your dna is all over the crime scene!

  • Comment number 92.

    All these people have been living in a fantasy world. the bankers and the so called regulators. It has all been so cozy.Heads must roll bigtime PLEASE.

  • Comment number 93.

    Why do we, the taxpayer employ these incommpetent people so callled bankers and controlers,(I'm trying for the moderatorsto be polite), they present their aplogies, I call them excuses and then carry on as is nothing has happened. Maybe we should bring back some old,retired bankers to run things as so called consultants from the "lite touch" have demonstrated that they have no inew ideas,and so getting back to basics.

  • Comment number 94.

    All these people have been living in a fantasy world. the bankers and the so called regulators. It has all been so cosy. Heads must roll. PLEASE

  • Comment number 95.

    But despite the admission of guilt, Lord Turner said that staff at the FSA would still be paid an estimated £33 million in annual bonuses.

    Feb 15th

  • Comment number 96.

    I had to check several newspaper reports before I could believe that the FSA, that failed so dismally to regulate the antics of Northern Rock
    HBOS, Bank of Scotland et al, has awarded itself £3,000,000 - three million pounds in bonuses.
    This is the latest manifestation of the 'snouts in the trough' syndrome that prevails in finance and government in this our "happy land".
    'Happy' like punch drunk as more and more nefarious practice is revealed to our wondering
    gaze. Lord Turner and Hector Sants gave a great impression of a couple of Spivs in front of the Bench as they defended the FSA - "Oh no guv. It wasn't us. And our mates was just doing what the Government told 'em to. Verdict "Guilty as
    charged".

  • Comment number 97.

    Yesterday we mulled over 17.4 million for a corporate jet

    Robert could you calculate the total running costs of the FSA over the last 10 years and let me know what value it has added

  • Comment number 98.

    How come Strongholdbarricades has his own personal moderator ?

    ~Anyway back to the FSA - light touch anyone ?

    Call an election.

  • Comment number 99.

    what a joke. the fsa's response to their monumental failure seems to be to schedule endless pointless meetings. the honest guys have always told them the truth, the crooks never will. as long as it's the dumbest guys in the city chasing the smartest there's no prizes for guessing who wins

  • Comment number 100.

    I nearly forgot to ask:

    What questions were asked about the FSAs bonuses?

    And what is going to be the outcome?

    Amazing that this subject is coming up when the FSA who let five out of ten banks go to the wall and are curtailing bankers bonuses!

    If the FSA receive any bonuses, it will be the biggest reward for failure that Brown has ever allowed to happen.

 

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