MPs attack FSA over Iceland investment

By stafff

The Financial Services Authority (FSA) should investigate the advice councils received which led them to invest in Icelandic banks, an influential committee of MPs has found.

The communities and local government select committee wants the FSA to take a more active role in the advice which led to local authorities having £1 billion of deposits frozen when the Icelandic banking system collapsed at the height of the financial crisis last year.

Committee chairwoman Phyllis Starkey said: “The FSA’s response to our report seems to suggest that their activities in relation to local authorities are effectively unregulated.

“The FSA has also declined to follow up our concerns about potential conflicts of interest in some of these firms.

“Given the sums of public money involved, these remain matters of some concern to us. We are pursuing these issues with vigour with the FSA.”

But the FSA described the criticism as “unfounded” because it does not have the powers to conduct the investigations MPs are demanding of it.

Its regulation covers only specific investment advice, rather than unregulated deposit advice, the FSA said.