RBS REPORT: AT A GLANCE

● Why publish this report?
Last year the FSA caused a public outcry by saying it would take no action against RBS chief executive Fred Goodwin and others despite a 17-month investigation. After pressure from MPs such as Andrew Tyrie, it agreed to produce a full report.

● Cause of RBS’ losses
The FSA said the rapid expansion of RBS’ global banking and markets (GBM) division under chairman Johnny Cameron was behind its huge losses. The market view that RBS had been visibly aggressive in expanding into high risk areas destroyed confidence, adding to its losses.

● Focus on profit, not balance sheet
The FSA cited RBS investors that said Goodwin’s pay rewarded earnings growth rather than balance sheet strength. The FSA said RBS was “slow to realise, during the course of 2007, that the risk it was facing was not only to its annual profit targets, but massively greater and amounting to a major balance sheet hit.”

● ABN Amro takeover
The FSA has pledged far greater scrutiny of major bank takeovers. RBS did not have to seek regulatory approval to buy ABN Amro but the FSA admits it could have blocked the deal “by other less direct means... if really determined”.

● Making executives accountable
The FSA wants bank executives to take fewer risks. It suggested making executives strictly liable for the impact of bad decisions to make it easier to fine or ban them after a collapse, or structuring pay so they are penalised for poor decisions. But it warned a strict liability basis for action risked breaching human rights and could discourage people from top jobs.

● Other regulatory reforms
The FSA also proposes wider reforms, including new leverage requirement to make sure banks focus on leverage as well as capital ratios. It wants the power to block hostile bank takeovers, and more assessment of how far a bank’s capital resources depend on minority interests. The FSA also wants to check how banks calculate their regulatory capital position, and if a firm’s shortcomings force the FSA to delay its capital guidance, the requirements it sets in the interim will be tougher than normal.

● Amending past mistakes 
The regulator has belatedly beefed up its supervision of RBS from just six people in August 2007 to 23 today. It says its supervision regime has been “radically transformed” with a greater focus on capital, liquidity and asset quality.

● Who’s to blame
The previous government, RBS’ executive management and board and the FSA itself all shared the blame for the bank’s collapse. The FSA shared the “delusions” of the “conventional confidence” of the time, it admitted.

● Labour “light touch” regulation
The regulator said if it had suggested tougher oversight of banks before the crisis, there would have been “extensive complaints that the FSA was pursuing a heavy-handed, gold-plating approach which would harm London’s competitiveness.” It quotes Ed Balls, then economic secretary to the Treasury, endorsing light regulation and then chancellor Gordon Brown opposing intrusive oversight.

● Why there were no sanctions against Fred Goodwin and others
There was not enough evidence to bring Goodwin or others from RBS either to court or a tribunal, the FSA said, as RBS’ failure did not automatically make its chief executive personally liable. The FSA would have to prove a particular executive was incompetent, dishonest or lacked integrity. RBS executives made “many” poor decisions, but the errors were not enough to take action.