U.K. lawmakers called for the Bank of England to be given the power to veto bank mergers and rebuked the financial regulator for failing to stop Royal Bank of Scotland Group Plc (RBS)’s 2007 purchase of ABN Amro Holding NV.
Parliament’s Treasury Committee made the criticism today in a response to last year’s Financial Services Authority report into the near-collapse of Edinburgh-based RBS. It suggests the law should be changed to give the central bank’s Prudential Regulation Authority the power to approve bank mergers and acquisitions when it takes over responsibilities from the FSA next year.
“It is crucial that the PRA takes on board an important lesson from this report -- there is no substitute for the exercise of judgment,” Andrew Tyrie, chairman of the cross- party Treasury Committee, said in a statement in London today.
Lawmakers in the U.K. are having a greater say in the way banks are run and policed than at any time in recent decades. They used today’s report to demand they are consulted on sanctions against directors of banks and on the PRA’s role. Tyrie also chairs a separate panel that is looking at standards in banking and whether plans to erect firewalls around banks’ retail operations are being watered down.
Today’s report said the FSA showed poor judgment and should have intervened in the 72 billion-euro ($94 billion) purchase of Amsterdam-based ABN Amro with Banco Santander SA (SAN) of Spain and Belgium’s Fortis, a deal that brought RBS to the brink of collapse.
Lawmakers also criticized the Bank of England and the Treasury for their role and attacked Adair Turner, the FSA’s chairman and a front-runner to succeed Mervyn King as governor of the Bank of England, for initially resisting a postmortem of the affair.
After acquiring ABN Amro, RBS reported a 24.1 billion-pound ($39 billion) loss for 2008, the largest in U.K. corporate history, and required a 45.5 billion-pound rescue by taxpayers - - the world’s biggest bank bailout. The FSA came under pressure from lawmakers to publish the probe into RBS after the agency cleared bank executives, including former Chief Executive Officer Fred Goodwin, of wrongdoing.
Even after global money markets froze in 2007, Goodwin pushed through the ABN Amro deal, the world’s biggest bank takeover. The acquisition saddled RBS with bad debt and depleted its cash reserves.
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