The Financial Services Authority (FSA) review of the Northern Rock fiasco shows that Northern Rock breached capital rules six months before its collapse.
That in itself is a damning indictment of the way that the bank was run. However, to compound its guilt, Rock also failed to tell its shareholders about it whilst the FSA dozed in the background.
Northern Rock reported a capital ratio of 9.74% at the end of March 2007, which was "in breach of its capital requirements", and told the FSA on April 19 2007.
Yet, the FSA did nothing.
Seemingly they were afraid of the CEO of Rock and his cronies.
The FSA themselves say that they have been cowed by "strong and aggressive characters within Rock’s management team".
What is the purpose of the FSA if it will not stand up to bullies and con men?
Rock did not bother to tell its shareholders, and compounded its lie by telling them in April that it had "excess capital" which it would pay back to shareholders via higher dividends.
The FSA, aside from ignoring the capital alert, had blood on its hands as far back as October 2006; when the Bank of England warned it about the risks of Rock's wholesale funding model.
The shareholders of Rock, who have lost everything, have the right to be furious with both the ex board of Rock and the FSA.
Undoubtedly both the board (executive and non executive directors) and the FSA must brought to account for this.
The most effective option available for the shareholders is to mount a class action against the board and the FSA. At the very least the shareholders should push to bankrupt the ex members of the board, and ensure that those who ran the FSA during this period are barred from holding public office/regulatory positions ever again.
It is little wonder that the financial services sector is regarded with such contempt these days.