'MPs could publish PWC reports into RBS'
I would not choose to have "better late than never" inscribed on my journalistic coat of arms.
But sometimes stories arrive at the pace of a snail rather than an electron - as is the case today as I commend to you a letter written on 28 March by the chairman of the Financial Services Authority, Adair Turner, to Andrew Tyrie, chairman of the Treasury Select Committee (TSC).
In fairness to me (I do try), the letter only became available last week. But even then I brilliantly managed to miss it.
The letter contains a number of noteworthy disclosures, relating to the collapse and rescue of Royal Bank of Scotland in the autumn of 2008, and also why it's taking quite so long for the FSA to publish a bowdlerised account of what went wrong at RBS and why.
Most striking is that Turner admits that the Treasury Select Committee has the right and the power to obtain from the FSA the reports written by PricewaterhouseCoopers (PWC) into the most important causes of RBS's collapse - and that the TSC could have already published these under parliamentary privilege.
'Cap in hand'
I'll examine his successful plea to the TSC not to do so in a moment or two. But, I have to say, I doubt that Lord Turner's request for censorship will satisfy everyone.
But before we get on to that, it is worth highlighting that Lord Turner's letter to Tyrie also dumps on his FSA predecessors for the way they regulated and supervised big banks in the years before the financial crisis of 2007-8.
He writes of the FSA's unpublished report on the supervision of RBS (which is wholly separate from PWC's enquiries) that it reveals "major deficiencies in both the rules the FSA applied and its supervisory practices with regards to large systemically important banks in the pre-crisis period".
That's a pretty stark "we got it wrong, and how!" For aficionados of banking collapses and regulatory bog-ups, Turner's remarks are the equivalent of an all-action trailer for a blockbuster film. Let's just hope he's not over-egged it.
Now in the letter, Turner says that the report of how the FSA failed to prevent RBS taking crazy risks starts in 2005 and finishes in April 2008 - which is more than five months before RBS actually collapsed.
This decision by Turner not to explore the FSA's role in the subsequent months, prior to the taxpayer rescue in October 2008, has already excited some criticism, from - for example - the Lib Dem peer Lord Oakeshott (see this weekend's Sunday Times).
But I am told that not long after Turner wrote his letter to Tyrie, the FSA saw the error of its ways (and did so before Lord Oakeshott launched a fusillade against it), such that the story of its own enforcement failings now finishes on 7 October 2008.
The significance of that latter date is that it's when the Bank of England started providing emergency liquidity assistance, or ELA, to RBS. Which is reasonable. Because the moment of failure for a bank is when it can't borrow enough from depositors or commercial banks to keep going, and it has to go cap in hand to the Bank of England for rescue loans.
For the avoidance of doubt, however, the provision of ELA by the Bank of England came a week earlier than the Treasury's decision to invest £20bn of taxpayers' money into the bank - which was the act of largesse by all of us that enabled RBS to survive the tsunami of losses that was about to hit.
Fighting the tide
Turner decided not to shine a light on the negotiations with the Chancellor that culminated in the de facto nationalisation of RBS, because that was an adventure in politics which the FSA feels it doesn't have the right to discuss in a public forum.
So the published record, in relation to why we as taxpayers were forced to wade up to our necks in RBS equity, won't be quite complete.
But why did the normally rational Adair Turner believe that a published narrative that ended many months earlier, in April 2008, would tell us all we really need to know about the FSA's mistakes?
Well his initial decision to stop the story there implies that the die was well and truly cast with RBS's reckless purchase of the toxic rump of the giant Dutch bank, ABN, in 2007, its headlong plunge into US subprime and its massive expansion of investment banking operations, called Global Banking and Markets.
What Adair Turner's letter also goes some way to confirm, perhaps inadvertently, is that by Christmas 2007 - only a few weeks after the ABN takeover had been completed - the FSA had belatedly noticed that RBS had far too little capital to absorb potential losses.
So the City watchdog put pressure on RBS to raise a ton of equity through a rights issue - and rather more equity than RBS thought it needed.
The outcome was RBS's stonking £12bn rights issue of April 2008, which almost certainly exhausted the capacity and willingness of normal shareholders to invest in RBS.
This is what Turner is saying when expressing his view that the narrative of the FSA's regulatory shortcoming could stop with the rights issue of April 2008: once RBS had raised £12bn in the markets, the FSA felt there was nothing more that it could subsequently do in a material way to prevent the bank going bust.
Which is a pretty scary thought, because it suggests that there are times when the world's great financial and economic currents are so strong that even regulators with enormous resources and power become utterly unable to influence the course of history.
Whether he is right to make that judgement on the helplessness of the FSA to steer RBS into safe harbour after April 2008 we should be able to assess later this year, when the former regulator and erstwhile central banker, Sir David Walker, has evaluated the FSA's three reports on the RBS debacle: viz the report on RBS's conduct, the report on the FSA's behaviour, and an account (largely written by Lord Turner) of why RBS failed.
But what will doubtless excite those who believe that the FSA should already have published all these reports is an admission to Mr Tyrie that the Treasury Select Committee has the right and ability to publish the juiciest accounts of what went wrong at RBS under privilege.
Adair Turner tells Mr Tyrie that the FSA has consulted its lawyers and been advised that "the TSC would have the power to request the documents and to publish them under parliamentary privilege if it wished".
The relevant documents are the enquiries carried out by Price Waterhouse Coopers for the FSA into management controls and the decision-making progress at RBS's Global Banking and Markets division, the decisions relating to the takeover of ABN and what RBS chose to tell investors at relevant times.
Many of us would dearly love to read what PWC uncovered about the causes of the biggest accident in UK banking history. So why aren't Andrew Tyrie and his fellow MPs on the Treasury Select Committee giving us that opportunity?
Why instead are they content with the publication - after Sir David Walker's evaluation of the material - of expurgated texts?
Well the MPs have been persuaded by Lord Turner that full disclosure - even if legally permissible - would not be judicious. "Our judgement is that this would not be in the long term public interest," Lord Turner writes.
He argues that if the PWC reports were published in full under parliamentary privilege, that might be seen as contrary to natural justice, in that those criticised in the report would not have had the opportunity to respond to the criticism. And he also says that publication might make such investigations harder in the future, because the FSA would no longer be able to give any assurance to those supplying evidence that their submissions would be confidential.
Those arguments for the kind of selective and edited publication that we'll now have will certainly not satisfy everyone.
RBS's collapse was a financial disaster of historic importance. Which is why some would say that it would have been appropriate for the TSC to make history by compelling publication of investigations that would normally be kept secret.