13th December 2011
Just how many times does the FSA report on Royal Bank of Scotland employ the phrase "with hindsight" in its near 500 pages? It is certainly the authors' favourite expression in the tens of thousands of words which much add up to the most extensive (and expensive for investors) "mea culpa" in regulatory history.
Investors may conclude that the FSA successor regulatory bodies (due late 2012 or early 2013) will need frequent, independent, and external stress-testing – and that firms entrusted with this oversight should be changed regularly to prevent over-cosy relationships.
But looking forward – rather than making "hindsight" excuses for a regulatory authority- there are lessons in the report for investors in both financial firms and in the wider economy. There were warning signs as long as five years before the RBS collapse.