FSA branded 'impotent' by MPs

FSA branded 'impotent' by MPs


The Treasury Select Committee has called the Financial Services Authority “impotent” for its part in handling the Icelandic banking collapse. 

In an official report, the committee condemned the regulator for failing to heed warnings about the Icelandic bank Kaupthing and its ability to manage a UK business.


Back in 2005 – before Kaupthing took over Singer & Friedlander, the UK investment bank – the FSA was made aware that there were problems in the bank’s accounts. A former CEO of Singer & Friedlander also told the regulator of accounts and management that appeared “strange” within the Icelandic bank, but still no action was taken.


The FSA had stated that it would not interfere with a bank governed by the financial regulator of Iceland.


However, MPs would not accept this, stating in the report: “We note with great concern the impotence of the FSA to tackle directly the concerns brought to its attention as a consequence of its lack of any jurisdiction.”


Financial advisers were also blamed for not warning their clients about the danger of depositing their savings in these fragile off shore banks. The Treasury Select Committee went on to say in the report: “Bearing in mind the heavy coverage in the financial press of Iceland’s fragility, we would have expected offshore savers using independent financial advisers to have been advised of the changing risk profile of their savings.”


In the report, it is suggested that the Treasury should bail out charities for the £120 million that was lost in Icelandic accounts. However, ministers were less sympathetic about the councils that lost over £900 million, saying that they do not deserve to be compensated.

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