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Sir Fred Goodwin lawyers ‘censure’ criticism in FSA report on RBS crisis

Text criticising former chief executive’s lack of experience was removed from investigation into bank’s near meltdown in 2008

Lawyers for Sir Fred Goodwin privately insisted that text criticising his lack of experience in banking be removed from the Financial Services Authority’s 450-page report last month into the bank’s near meltdown in 2008.

The revelation comes less than a week after David Cameron revealed that he had asked the honours committee to examine the possibility of stripping the former Royal Bank of Scotland chief executive of his knighthood.

The announcement was made by Bill Knight, one of the FSA report’s two external supervisors, under protection of parliamentary privilege. “It is true that reference to Sir Fred was changed,” he told an MPs’ committee. “There was [in early drafts] a suggestion he lacked the experience to run an international bank.”

The FSA has said it is unable to disclose who was interviewed for last month’s report, including whether or not it spoke to Goodwin.

In response to freedom of information requests by the Guardian, the City regulator said it could not reveal who had been interviewed, when and for how long, because it was “with the lawyers of the individuals concerned”.

Goodwin was interviewed in 2010 but it is unclear how many occasions the FSA spoke to him. The regulator is now writing to all the individuals involved to ask permission to name them.

An accountant by background, Goodwin joined RBS in 1998, effectively as anointed successor to the chief executive Sir George Mathewson. He took the helm three years later, aged 41, quickly asserting what the FSA report described as an “assertive and robust style”. Previously Goodwin had helped National Australia Bank take over Clydesdale and was asked by the former to be its chief executive.

At least one former senior RBS executive previously claimed Goodwin appeared enthusiastic for acquisition opportunities but less focused on some areas of banking. “The corporate banking and investment banking world was really quite foreign to him. He was less interested and less good at that – how you raise money, questions of money flow, how do you lend in and how you get it back. Liquidity, and stuff like that.”

Giving evidence to the Treasury select committee, Knight defended the decision to remove criticism of Goodwin’s experience, under pressure from lawyers.

“It was an attack on his competence. And there was no evidence of incompetence,” Knight said. He said he thought the report, overall, did not amount to censure of Goodwin.

On this point, Sir David Walker, his fellow report supervisor, disagreed. Asked if the report amounted to censure against Godwin, Walker said: “In the non-legal sense, yes.”

This conclusion could prove an important piece of evidence for the honours committee to consider, said one MP.

The FSA had originally intended not to publish a report following its review of actions of senior regulated figures at RBS; it concluded that bad decisions, rather than misconduct, were at the root of the bank’s near failure.

Initially defending that decision, the FSA chairman, Lord Turner, claimed that a report on the failures at RBS “would add little if anything to our understanding of what went wrong”.

Eventually, under pressure from Andrew Tyrie, chairman of the Treasury select committee, the FSA agreed to prepare a report for publication.

The business secretary, Vince Cable, has privately made clear that there will be no more probing of past events at RBS.

He will not use his powers to launch a formal section 432 inspection, as has been common practice concerning past corporate scandals such as Guinness, MG Rover, Maxwell, Lloyds, and House of Fraser.

The public, therefore, will have no forensic analysis concerning fault against named individuals at the FSA and RBS, or among the bank’s advisers.

Knight defended the government’s decision not to have a full inspection suggesting they took “a very long time, cost a great deal of money and are quite often noncommittal”.

Some of the MPs disagreed, suggesting the cost, to taxpayers and the wider economy, of RBS’s 2008 crisis merited as full an explanation as possible being given to the public.

Other countries, including the US, Ireland and Iceland, which have experienced banking crises, have offered much fuller official accounts of events leading up to their financial-sector woes. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds