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FSA 'failed' in Rock supervision FSA 'failed' in Rock supervision
(10 minutes later)
The UK financial watchdog, the Financial Services Authority, has admitted that it failed to adequately regulate Northern Rock.The UK financial watchdog, the Financial Services Authority, has admitted that it failed to adequately regulate Northern Rock.
The FSA said there was "a lack of adequate oversight and review" by the agency of the troubled bank.The FSA said there was "a lack of adequate oversight and review" by the agency of the troubled bank.
It said too few regulators were assigned to monitor Northern Rock, which ran into trouble in September.It said too few regulators were assigned to monitor Northern Rock, which ran into trouble in September.
The FSA said it would be overhauling its procedures as a result of the weaknesses identified.The FSA said it would be overhauling its procedures as a result of the weaknesses identified.
Newcastle-based Northern Rock was nationalised in February after the credit crisis forced it to seek a Bank of England lifeline to fund its mortgage loan book Newcastle-based Northern Rock was nationalised in February after the credit crisis forced it to seek a Bank of England lifeline to fund its mortgage loan book.
Last week it said it would cut about 2,000 jobs by 2011 and reduce its residential mortgage lending by half under plans to turn around its fortunes.Last week it said it would cut about 2,000 jobs by 2011 and reduce its residential mortgage lending by half under plans to turn around its fortunes.
Northern Rock must also pay back Bank of England loans worth about £25bn.Northern Rock must also pay back Bank of England loans worth about £25bn.
The review, carried out by the FSA's director of internal audit, identified waht it said were a number of areas for improvement in its supervision of banks. Competence
As a result, it plans to beef up its team with staff that will regularly review the supervision of of all "high-impact" firms to make sure procedures are being adhered to. The review, carried out by the FSA's director of internal audit, identified what it said were a number of areas for improvement in its supervision of banks.
As a result, it plans to beef up its team with staff that will regularly review the supervision of what it called "high-impact" firms to make sure procedures are being adhered to.
It also planned to upgrade its training of FSA staff and put more focus on assessing the "competence of firms' senior management".
Hector Sants, FSA chief executive, said that it was "clear from the thorough review carried out by the internal audit team that our supervision of Northern Rock in the period leading up to the market instability of late last summer was not carried out to a standard that is acceptable".
But he added that it was "impossible to judge" whether that would have affected the outcome in this case.
"I am determined through the programme of work that I am announcing today, that proper standards will apply to all significant firms supervised by the FSA," he said.