Sants urges law change so ‘incompetent bankers never work in the sector again’

Hector Sants, chief executive of the Financial Services Authority, told MPs that individuals such as the former Royal Bank of Scotland boss could not be properly punished under the current arrangements.

Speaking to the Treasury select committee yesterday, Mr Sants said he agreed with the anger shown by MPs that a recent damning report by the FSA into the failure of RBS in 2009 – which led to the taxpayer bailing out the bank to the tune of £45 billion – failed to pinpoint the individuals involved, including Sir Fred.

Last week, the committee learned that the only section directly criticising Sir Fred was removed at the insistence of the former RBS chief executive’s lawyers.

When Tory MP David Ruffley branded the FSA report “useless” for failing to point the finger of blame at individuals responsible, Mr Sants “fully agreed” with him.

Defending the report, he said: “The substance of the report is to make clear that we consider the board and the senior executives of RBS, which includes Goodwin, to have made a series of very poor decisions which led to the bank failing.”

But on holding bankers to account, he went on: “We should change the regulatory regime to allow the regulator to take those sort of assessments into account to ensure that people who have shown that sort of serial misjudgment are not allowed to run financial institutions again.”

He told the committee that he did not believe Sir Fred and other “incompetent” RBS executives who made the decisions at the time would get work in the financial sector again, but this “could not be guaranteed”.

He added: “The law should be changed, so incompetence can be penalised.”

Meanwhile, Mr Sants was also damning about the FSA in the run-up to the banking collapse of 2008 and 2009. At the time he was a managing director of the section that looked after investment banking and foreign banks, but had no oversight of RBS, because all its operations were the responsibility of another section for UK retail banking.

He told MPs that he had offered to look at RBS prior to its collapse, while Sir Fred was masterminding the takeover of the Dutch bank ABN Amro, which led to RBS’s collapse a year later.But he said: “My offer wasn’t taken up. Maybe I should have shouted louder at the time.”

He subsequently took over as chief executive of the FSA and had to defend his failure to meet RBS bankers for another four-and-a-half months.

He told the committee this was because his primary focus was on the UK mortgage market and the problems at Halifax Bank of Scotland, Northern Rock and Alliance & Leicester.

He added: “We also had very little expertise in investment banking at the FSA at the time.”

He also had to explain why he, as chief executive in 2007, failed to intervene in the ABN Amro takeover, which was going on when he was appointed.

He told MPs that at that point it was too late.

“There was no basis to intervene,” he insisted. “You could not have concluded it did not meet threshold conditions.”

He added: “The time for the FSA to have intervened was before the offer document was published.”

DAVID MADDOX