'Catalogue Of Errors' Caused RBS Failure

The failure of Royal Bank of Scotland was caused by light-touch regulation and a catalogue of financial errors, according to a long-awaited report.

The near-500 page document, released by the Financial Services Authority (FSA), has shed light on what went wrong in the lead-up to its £45.5bn rescue in 2008.

RBS, which is now more than 80% owned by the Government, needed rescuing amid the credit crunch after being weakened by the disastrous £50bn acquisition of Dutch lender ABN Amro under the leadership of Sir Fred Goodwin.

The report includes a recommendation that banks should gain regulatory approval for significant acquisitions and possibly also obtain independent advice about such deals.

It raises the prospect of bank directors being forced to prove their innocence in the event of a future bank failure, as revealed by Sky News City editor Mark Kleinman .

But the report confirms the FSA does not intend to pursue any new enforcement action against any of RBS's former directors.

The report outlines six principal reasons for RBS's downfall, including an excessive reliance on riskier short-term funding and inadequate due diligence which paved the way for RBS and its consortium partners to carry out their ABN Amro takeover.

The regulator said in a 300-word report released last December that it found no evidence of fraud or dishonest activity in the lead-up to the crisis, although the bank made a series of bad decisions.

But the full report, which is the result of a two-and-a-half year probe, has been made public at the request of the Treasury Select Committee, which said the original statement summing up the results of its investigation failed to answer important questions or show that lessons had been learned.

RBS was expanded aggressively under the eight-year leadership of Sir Fred Goodwin, who was replaced by Stephen Hester after the bailout.

It was swelled by a series of acquisitions, including NatWest in 1999 and US bank Charter One in 2004.

By the time of its collapse, its balance sheet was bigger than the entire UK GDP.