FSA owns up to failing to spot excessive risk taking by banks

| February 15, 2009 | 0 Comments
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Lord Turner, the chairman of the Financial Services Authority (FSA), has admitted to failing to acknowledge the excessive risks being taken by banks.

Speaking on BBC1′s Andrew Marr Show, Lord Turner said that by 2004 “the whole system was risky”.

Lord Turner is currently reviewing the way the financial sector is regulated and his findings are set to be published in a report due on 18 March. The review is set to bring changes to rules on credit rating agencies and how bankers are paid.

The FSA was established by Gordon Brown in 1997 when he was Chancellor and the Watchdog has been criticised for also failing to see the crisis at Northern Rock.

However, despite the failures, Lord Turner who took over as chairman of the City Watchdog in September 2008, said that FSA staff would still be paid an estimated £33 million in annual bonuses. However, Lord Turner pointed out that the authority’s chief executive, Hector Sants, would not receive a bonus.

Lord Turner defended staff bonuses and said “If you are saying we should now cut the bonuses, you are saying we should cut their pay by 15%. That’s against a background where we are being told we need better people. That’s not the way to go“.

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