FSA and Northern Rock

The Financial Services Authority (FSA) faces an uncertain future after an internal review found four "failings" in its handling of Northern Rock.

September 2007 saw a run on Britain's fifth-largest mortgage lender which, though stabilised, eventually forced the government to safeguard the bank's future through nationalisation.

Opposition parties have criticised the tripartite system of the Treasury, Bank of England and FSA's failure to cope with the crisis.

The Commons' Treasury committee reported in January the FSA was guilty of a "substantial failure of regulation" and said the UK's international reputation had been damaged as a result.

Now the FSA has admitted its regulatory practices in the years approaching the bank's collapse were flawed.

The review covers the period January 1st 2005 to August 9th 2007, when it deems the "crisis period" to have begun.

Excessive staff turnover, shifting responsibility for Northern Rock's supervision and a lack of adequate resources targeted at the firm's direct supervision are among the faults it outlines.

But the review insists the supervision of Northern Rock "was at the extreme end of the spectrum of the supervisory practices" observed and has outlined plans to rectify the failings.

Whether this will prove sufficient to placate those angry at Gordon Brown's 1997 reforms of the financial regulatory system remain to be seen.

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