Sir Fred will escape further censure over RBS, reveals regulator

Published on Saturday 10 December 2011 00:00

FORMER Royal Bank of Scotland directors will escape further punishment from the regulator or any accusation that they misled investors over a massive fund-raising exercise, an official report into the group’s collapse will reveal on Monday.

The long-awaited probe by the City regulator, the Financial Services Authority, will question the incentives paid to City advisers and its own role in supervising the sector as it plunged into crisis.

A surprise finding will be that boardroom colleagues of ousted chief executive Sir Fred Goodwin did not feel intimidated or bullied by him, despite claims about his autocratic style of management.

Crucially, for RBS investors who lost big sums as the bank fell into taxpayer ownership in 2008, it is understood the FSA has found no “materially misleading” facts in the bank’s prospectus for a £12 billion rights issue in the spring of that year. Within months RBS needed a £45bn treasury-led bailout that eventually led to the clear-out of virtually the entire board, including Goodwin and chairman Sir Tom McKillop.

Those who left included former investment banking head Johnny Cameron, who was banned last year by the regulator from taking another significant job in the financial services industry.

Lord Turner, chairman of the FSA, is expected to deliver a damning judgement on the lack of due diligence, or detailed enquiry, into the RBS‑led consortium’s acquisition of Dutch bank ABN Amro, saying it amounted to “two lever‑arch files and a CD‑ROM”. The claim has been disputed by the bank’s former directors.

But the FSA is not expected to pursue further enforcement action against former RBS directors which could result in a fine or expulsion from working in the City.

Shareholders are expected to react strongly to the report. RBS Action Group is in the middle of a long-running legal claim against the bank and its former directors for their losses.

The firm’s lawyers at Leon Kaye solicitors were not available for comment yesterday. But one action group member, Michael Lamoureux, who has lost £100,000 on his RBS shares, said yesterday that shareholders would be “very disappointed and surprised” if the FSA has cleared the bank of misleading them in the run up to the 2008 rights issue.

Mr Lamoureux said: “RBS Action Group has had experts in banking and prospectuses who said RBS was far too optimistic back in 2007. But I would not be at all surprised if the FSA said due diligence on ABN was lacking. It was virtually non‑existent and it (the deal) was just down to the hubris of Goodwin.”

The FSA report, two and a half years in the making after extended discussions with RBS’s lawyers on issues of confidentiality, is expected to say there was evidence of poor management decision making at the bank but not of any lack of integrity.

Sources say there will be a recommendation that regulators should be given greater powers to block “aggressive” takeovers in the financial sector and that banks should place more emphasis on risk management than maximising profits.

The FSA is known to have been particularly concerned last year by the abortive failure of insurance giant Prudential to take over AIG Asia, whose clumsy execution and communication to shareholders triggered a widespread investor revolt.

The report, which runs to about 500 pages, is also expected to say that the reasons for RBS’s downfall included excessive reliance on riskier short‑term funding.

One City analyst said prior to the 2007 credit crunch forming the backdrop to the ABN deal that the Scottish bank was one of the “worst capitalised” banks in Europe.

But the regulator is also likely to admit to serious shortcomings, a move likely to satisfy the Chancellor George Osborne who has ordered a new regime.

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24

vistaero

Saturday, December 10, 2011 at 03:29 PM

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23

George Coutts

Saturday, December 10, 2011 at 03:28 PM

Ofcours he will be let off, dont you know he is one of Elizabeths favourites so like Dianas assasination because of Royal connection he skips of Scot Free......Excuse the pun if you lost out to RSB Freddy but Until Freedom rings, Royal Skulduggery willContinue to piddle on you from the balcony. Meryy Xmas Fred, can I have a prezi, I only want a paradise Island, fully furiished to the best of tase ofcourse!

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22

vistaero

Saturday, December 10, 2011 at 03:25 PM

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21

harlequin

Saturday, December 10, 2011 at 02:47 PM

What a white wash,the US fund case against RBS for mis-selling is still going ahead and will now cost us the taxpayer a minimum of £800 million.

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20

Willie Boy

Saturday, December 10, 2011 at 02:20 PM

This decision shows exactly how rotten and corrupt the UK is. Tens of thousands lost their savings in Goodwin's ponzi scheme but there is no recourse in law for the defrauded and no sanction against the corporate swindlers. In fact, this corporate swindler walked away with nearly £20 million of a pension pot. Well he may have spent his ill gotten pension and a new house and a million pounds of security, but at the end of the day he cannot hide forever from the people that he defrauded. Mr Goodwin's day will come when someone gives him payback. That certainly seems for sure, and few will shed a tear.

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19

Mercutio

Saturday, December 10, 2011 at 01:36 PM

#18 Of course it is always somebody else to blame. But Goodwin and his mentor Mathewson as well as the financial shyster Johnny Cameron and the naive McKillop are up to their neck in it. The Folly at Gogarburn is an allegory of the hubris displayed by those who managed "the Bank that Ran Out of Money.

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18

wee-scamp

Saturday, December 10, 2011 at 12:50 PM

# 10 Mercutio says "It seems to have escaped your notice that the RBS disaster was born and bred here in Scotland." I'm sorry but that's absolutely wrong. The biggest influence on the behaviour of RBS management were its main institutional shareholders who were demanding larger profits and larger dividends and most of those were City based fund managers. Next there was the FSA, the Treasury and the BoE all of which are not Scottish institutions. Had the fund managers got any sense they would have not risked doing the ABN Amro deal. After all, they had to approve it and approve it they did. Of course the regulators could also have stopped that deal but their relationship with the City was and still is too close for them to have essentially overruled not just RBS but its City based shareholders.

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17

George Coutts

Saturday, December 10, 2011 at 12:45 PM

Ofcourse Freddy boy oops I mean SIR. And when he is old enough he will sit in the House of Sleeping lords and get paid handsomley for that. But Like Iron Maggie and her likes.....WE NEVER FORGET so be warned Freddy, stay as far away from Scotland cos next time you might get burned....SEVERELY!

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16

vistaero

Saturday, December 10, 2011 at 12:12 PM

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15

Phil C

Saturday, December 10, 2011 at 11:24 AM

#13 Merc.....But you're banging on about Scottish accents amongst Salmond's spivs and speculators. That may well be, but I'll bet it's those Scottish accents with old school ties on, that sound more English!! That's as irrelevant as your point though. ..............................................................Salmond did nothing wrong. Save your fire for Brown, Balls, the spivs and speculators and our muppet regulatory regime.

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14

Leisure_suit_Larry

Saturday, December 10, 2011 at 11:04 AM

Gordon Brown is the culprit, he took regulation from BoE and created a toothless FSA of which Turner was leading. Lack of regulation and the desire to maintain London as a leading financial centre was the reason. Goodwin was knighted under the recommendation of Brown.

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13

Mercutio

Saturday, December 10, 2011 at 10:53 AM

#11 Your point about Goodwin and his colleagues deserving to be punished will find no disagreement with me, I lost a good part of my life savings in the RBS crash.__________________However Mr Salmond was nowhere near right on this issue, Gordon Brown was severely and rightly criticised after the event for removing oversight of the banks from the Bank of England and giving it to the FSA (foxes looking after the hen run). Salmond was critical even of the reduced regulation of the FSA, influenced no doubt by the very man who heads up his Council of Economic Advisers Sir George Mathewson.----------------The same Sir George who was non-executive chairman of hedge fund Tosca (spivs and speculators), which was active in RBS's disastrous takeover in 2007 of Dutch bank ABN Amro.

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12

Phil C

Saturday, December 10, 2011 at 10:49 AM

#9 New U....and it was Gordon Brown & Ed Balls who deregulated the banks, NOT Alex Salmond. The investment banks needed more, not less, regulation.

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11

Phil C

Saturday, December 10, 2011 at 10:28 AM

#5 Merc...Your oft repeated comments seem more about having a go at Salmond, with the benefit of hindsight, than expressing any helpful truths. ..........................................Salmond was proposing a light touch regulation BEFORE the banking meltdown, before Goodwin's shenanigans were known. We had a hugely cumbersome bottom-up regulatory system of checking that individual advisers had crossed their t's and dotted their i's, checking training etc. Result was nobody was really checking on the Goodwins at the top. We needed lighter touch but more effective regulation. ........................................................And yes there were many spivs and speculators, mainly in the London 'investment' firms. Salmond was referring to those who made (or lost) money through gambling (and influencing) share prices. He did this AFTER the banking collapse. I'm sure many had Scottish accents but that is irrelevant. ........................................................Goodwin and his ilk deserve much more punishment. It's simply wrong that he should be wallowing in luxury for the rest of his life on the back of a largely incompetent and dishonest career. Just like huge bonuses are wrong, Executive pay is wrong GREED IS WRONG. .........................................................But Alex Salmond was mainly right in what he said and you, Merc, are being disingenuous.

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10

Mercutio

Saturday, December 10, 2011 at 10:18 AM

#9 It seems to have escaped your notice that the RBS disaster was born and bred here in Scotland.

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