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FSA Unable to Publish RBS Report Without Permission

The U.K.’s Financial Services Authority wasn’t able to publish its supervisory report on Royal Bank of Scotland Group Plc without permission from the banks and individuals involved in the investigation.

The FSA is prohibited under U.K. and European Union law “to publish information collected through a supervisory investigation” without permission, said Hector Sants, chief executive officer of the agency. Lawmakers should review whether the Prudential Regulatory Authority, which will replace the FSA in 2012, should have more power to release data, he said.

The FSA cleared RBS and former executives including ex-Chief Executive Officer Fred Goodwin in the Dec. 2 report, which faulted the bank for “a series of bad decisions” before the financial crisis. Edinburgh-based RBS posted the biggest loss in corporate history in 2008 and required a bailout of 45.5 billion pounds ($72 billion) following its acquisition of ABN Amro Holding NV.

“I’m extremely sympathetic to those people who argued that the FSA should publish the report,” Sants said at a conference in London. “There isn’t actually a report we can put immediately” into the public domain, Sants said. It would take the FSA “several months” to turn the investigation files into a readable report.

The FSA was probing the 2007 ABN Amro takeover, conduct by RBS executives and a 2008 rights offering. The regulator said in March 2009 it would examine senior managers of banks that collapsed or accepted government money.

RBS spokeswoman Linda Harper declined to comment today.

Cable ‘Disappointed’

Liberal Democrat Business Secretary Vince Cable, in a letter to Adair Turner, chairman of the FSA, urged the FSA to publish any report into whether the lender’s former executives broke regulatory rules in the run-up to the 2008 bailout. In the letter, Cable said he was “disappointed” the findings weren’t public.

U.K. Treasury minister Mark Hoban said the report’s publication is a matter for the regulator.

“It’s a matter for the FSA, not for the government,” Hoban told a panel of lawmakers in the House of Commons in London today. “They have issues around confidentiality of that report. I can honestly say we haven’t seen the report either.”

Chancellor of the Exchequer George Osborne said in June he will abolish the Financial Services Authority and give most of its power to the Bank of England, undoing the regulatory system set up by Gordon Brown in 1997.

New Regulators

The FSA will be wound down and replaced by at least two bodies. A Prudential Regulatory Authority will be created as a subsidiary of the central bank. Sants said the PRA will be more focused on reducing the impact of firm failure than the FSA has been and relatively less on reducing the probability of failure.

The PRA will not be attempting to pursue a “zero failure regime,” Sants said in the speech at Thomson Reuters Corp.’s offices in London. “Persuading society that this is an acceptable goal will be a challenge.”

Osborne will also set up a Financial Policy Committee at the bank and establish a consumer protection and markets agency.

Sants said that the new regulators will move toward more rules-based approaches to consumer protection rather than relying on market disciplines.

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