Hector Sants the CEO of the beleaguered Financial Services Authority (FSA) has finally admitted what everyone else has known for many months, namely that its handling of Northern Rock was unacceptable.
The FSA's internal review of the fiasco stated that the "quality, intensity and rigour" of oversight by its management had been inadequate.
It said that its supervisory teams had failed to follow up with Northern Rock on the vulnerability of its business model, as the credit crisis took hold last summer.
Resources were inadequate, and managers failed to ensure that all available "risk information" was used to help to prevent an impending crisis.
Sants said that the FSA's handling of the affair was "not carried out to a standard that is acceptable".
He is quoted in The Times:
"It is clear from the thorough review carried out by the Internal Audit team that our supervision of Northern Rock in the period leading up to the market instability of late last summer was not carried out to a standard that is acceptable, although whether that would have affected the outcome in this case is impossible to judge."
Shutting the stable door after this horse has well and truly bolted, the FSA will now introduce a new group of specialists to review the supervision of "high-impact firms" with the number of staff monitoring each firm increased from previous levels.
It said the risk department of the FSA would be expanded and supervisory training would be upgraded, there will also be greater focus on liquidity and supervision of high-impact retail banks such as Northern Rock.
Needless to say, the FSA has refused to apologise.
Michael Fallon, senior member of the Treasury Select Committee, had called for the report to contain the word "sorry".
Quoted in The Times, Mr Fallon said:
"They failed in their duty.
There were too few people regulating a very large bank and they didn't pay enough attention to liquidity issues."
What is the point in the FSA if it doesn't act in a proactive manner in order to ensure the effective functioning of the financial system?
Simon Morris, of CMS Cameron McKenna, said:
"If a major firm regulated by FSA were to operate with such poor management oversight and such weak systems and controls, then FSA would have shut it down by now".
Whatever the FSA claims that it is now doing to improve matters, these "improvements" will come to nothing if the current tripartite system (where no one is actually in charge, and therefore responsible) remains in place.
Unfortunately, because this dysfunctional system was created by Gordon Brown, until Brown is removed from office there will be no change to the tripartite system and the UK's financial system will continue to remain exposed to failures such as Northern Rock.