Lord Turner Chairman of FSA v ex Directors of RBS

Mark Kleinman

December 08, 2011 5:02 PM

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Lord Turner, the chairman of the Financial Services Authority
(FSA), has placed himself on a collision course with the former
directors of Royal Bank of Scotland (RBS) by refusing to bow to
objections over criticisms of their conduct at the crisis-hit lender.
I
can reveal that Lord Turner is expected to say in his foreword to the
report on RBS's failure, which will be published on Monday, that the
bank conducted due diligence ahead of its £49bn takeover of ABN Amro
which "amounted to two lever-arch files and a CD-ROM".
I'm told
that some of RBS's former directors, whose lawyers have scrutinised the
report, have objected to the claim on the basis that it is inaccurate
and misleading.
But my sources tell me that Lord Turner has refused to budge and that the phrase will remain in the final report.
In
one sense, the wording should be uncontroversial: Sir Fred Goodwin, the
boss of RBS at the time of the ABN deal, said publicly that he wanted a
"due diligence-light" approach to the takeover because of the lack of
time available to the bank.
At the time, Goodwin cited Barclays'
own extensive due diligence as a reason for RBS not to need to replicate
it. That view turned out to be disastrously misguided as ABN's exposure
to toxic assets in the US sub-prime mortgage turned out to be
gargantuan.
Nonetheless, it does seem that Turner's
characterisation is deliberately provocative and given the weight that
his words carry as the chairman of the City regulator, it might be
argued that he is heightening the exposure of those former directors to
the risk of litigation.
It's also the case, as I have mentioned
before, that the report acknowledges that ABN was a bank regulated by
some of the most rigorous financial regulators in the world - and if the
due diligence carried out by RBS's board was inadequate, that also
raises profound questions about the quality of the FSA's own supervision
of the bank.
Neither the FSA nor RBS would comment.

At last......someone who tells it like it was.....the BBC docu the other night about Goodwin and the Board was very good.