The Financial Services Authority of Britain admitted to mistakes it made in supervising Northern Rock, the stricken bank that became a victim of the credit crunch.
LONDON — Britain's financial watchdog on Wednesday admitted to mistakes it made in supervising Northern Rock, the stricken British bank that became a victim of the credit crunch last year.
The Financial Services Authority said in a statement that it had been guilty of insufficient "supervisory engagement" with Northern Rock in the run-up to the crisis in late 2007.
It also stressed that its supervisory team had failed "to follow up rigorously with the management of the firm on the business-model vulnerability arising from changing market conditions."
The global credit crunch, which resulted from the collapse of the US subprime home loans sector, forced Northern Rock to request emergency funding from the Bank of England.
Northern Rock was brought to the brink of collapse last September when it could not raise funds on credit markets to cover its liabilities and depositors began queuing round the block to withdraw their savings.
This was the first run on a British bank in more than a century and led the government to nationalise the bank in February.
The Financial Services Authority, which has been heavily criticised for its perceived failings, said it was reforming its working practices following the findings of its internal review.
The FSA's director of internal audit, Rosemary Hilary, said Wednesday that reform to the watchdog would ensure that in future there was "good record-keeping, good information flows and the right amount of engagement and supervision of front-line staff by management."
FSA chief executive Hector Sants added: "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.
"However, I am determined through the programme of work that I am announcing today, that proper standards will apply to all significant firms supervised by the FSA," Sants added in the authority's statement.
Date created : 2008-03-26