On December 12, the UK Financial Services Authority (FSA) published its Report on the failure of the Royal Bank of Scotland (RBS) and the FSA’s conduct in relation to it.

The Report considers: why RBS failed and the complex combination of factors that led to RBS’s failure; lessons to be learned with respect to bank management and the UK regulatory framework and supervision; and the FSA enforcement division’s focus on certain areas of RBS’s business and the reasons that led the enforcement division to conclude that it was not appropriate to bring enforcement proceedings.

The Report notes that although poor capital and liquidity regulation made it more likely that there would be a systemic crisis (and therefore set the context for the failure of RBS), and a “flawed supervisory approach” on the part of the FSA provided insufficient challenge to RBS, the ultimate responsibility for the bank’s failure must lie with RBS’s senior management and its governance and culture.