A long-awaited report into the failure of Royal Bank of Scotland will blame light-touch regulation and a catalogue of financial errors for pushing the bank to a taxpayer bailout in 2008.
The near-500 page report will be released by the Financial Services Authority (FSA) and will shed light on what went wrong in the lead-up to its £45.5 billion rescue.
The bank, which is now more than 80 per cent owned by the Government, needed rescuing amid the credit crunch in 2008 after being weakened by the disastrous £50 billion acquisition of Dutch lender ABN Amro under the leadership of Sir Fred Goodwin.
The report is expected to include a recommendation that banks should gain regulatory approval for significant acquisitions and possibly also obtain independent advice about such deals.
It will raise the prospect of bank directors being forced to prove their innocence in the event of a future bank failure but will confirm that the FSA does not intend to pursue any new enforcement action against any of RBS’s former directors.
The report is expected to outline six principal reasons for RBS’s downfall, including an excessive reliance on riskier short-term funding and inadequate due diligence which paved the way for RBS and its consortium partners to carry out their ABN Amro takeover.
The FSA is likely to say that it failed to spot the problems because it was under pressure from the government to operate a hands-off regulatory regime.
The regulator said in a 300-word report released last December that it found no evidence of fraud or dishonest activity in the lead-up to the crisis, although the bank made a series of bad decisions.
But the full report, which is the result of a two-and-a-half year probe, is now being made public at the request of the Treasury Select Committee, which said the original statement summing up the results of its investigation failed to answer important questions or show that lessons had been learned.
Since it became clear that the report would be made public, lawyers representing top bankers are reported to have been involved in protracted negotiations to have words such as “gambling” removed from the document.
But the FSA has said the report will not be a blow-by-blow account and those hoping for an investigation into the leadership of Sir Fred are likely to be disappointed.
RBS was expanded aggressively under the eight year leadership of Sir Fred, who was replaced by Stephen Hester after the bailout. It was swelled by a series of acquisitions, including NatWest in 1999 and US bank Charter One in 2004. By the time of its collapse, its balance sheet was bigger than the entire UK GDP.