5.5.2011

By Simon Miller

A former chairman of Morgan Stanley has been appointed to conduct a review of the Financial Services Authority's (FSA) investigation into the failures at Royal Bank of Scotland (RBS).

The Treasury Select Committee (TSC) chairman Andrew Tyrie, in agreement with the FSA, has appointed former Morgan Stanley chairman, and current senior adviser to the US bank, Sir David Walker and Bill Knight, chairman of the Financial Reporting Review Panel, to conduct an independent review of an FSA report into RBS.

The FSA report analyses the causes of RBS' failure, a summary of the findings of the FSA investigation into matters relating to RBS’ decisions, risk controls and governance processes and an assessment of the FSA’s regulation and supervision of RBS identifying any deficiencies.

The review will examine whether the FSA report fairly reflects the findings of the FSA’s investigation of RBS and the findings of its analysis of its own regulatory and supervisory activities. The terms of reference for this independent review will be published shortly.

The appointment of the independent reviewers follows discussions between the FSA and the TSC about how to ensure that the FSA’s report will be seen as a rigorous and transparent account of the different factors which contributed to RBS’ failure.

Adair Turner, chairman of the FSA, said: “There is strong public interest in having a clear account of the causes of RBS’ failure. The FSA is committed to producing such an account. Producing a high quality account takes time, both because the causes of RBS’ failure were complex and multi-faceted and because of the need to respect due legal process and confidentiality constraints.

“I am confident however that the final report will be seen as an open, fair, and valuable contribution to public understanding. The appointment of the independent reviewers will provide public assurance of the report’s openness and contribute to its quality."

A non-executive sub-group of the FSA Board chaired by Brian Pomeroy will also review the process and findings of the FSA’s report and will interface as appropriate with the independent reviewers.