UK banks under regulatory scanner

14 April 2009

UK banks are under the regulatory scanner with the UK Financial Services Authority initiating an investigation in some of their questionable business practices.

The FSA inquiry is expected to cover issues including risk management processes, the amount of information available to shareholders and the behaviour of directors before the emergency rescues of the Royal Bank of Scotland and HBOS last year.

The move follows a warning last month from Hector Sants, FSA chief executive, that bankers should not be complacent about his organisation. In a speech to members of London's financial community, he said, ''There is a view that people are not frightened of the FSA. I can assure you that this is a view I am determined to correct. People should be very frightened of the FSA.''

Sants also singled out senior management at big banks for their role in the crisis. His comments indicate that the behaviour of senior RBS and HBOS executives, many of whom have left in management clear-outs, will be scrutinized further after months of public vilification.

"It also needs to be recognised that the ultimate responsibility for what has happened rests with firms' senior management," he said. "In reviewing the recent litany of firm failures in many cases, albeit with hindsight, specific decision and strategies can be seen to be at the root of those firms' demise."

The new RBS chairman, Sir Philip Hampton, has asked lawyers to determine whether any of the recent executive payouts can be clawed back after the former CEO rejected approaches seeking a voluntary reduction in his £16.9m pension pot. Hampton has called for an end to the "public flogging" of RBS bankers and blamed the bank's huge losses on a "tiny minority" of staff.