Lord (Adair) Turner produced an intelligent, well-researched report into the future of pensions. His analysis was excellent. His recommendations were little short of disastrous. Next week, in his capacity as chairman of the FSA, we must hope that history is not about to repeat itself. He is due to publish another important document, a 500-page official report into the near-collapse of the Royal Bank of Scotland.
This is not the FSA’s first report into the affair. That was suppressed internally as too shocking (and thus legally risky) for public consumption. Since the taxpayer had stumped up £45 billion, or about £750 for every man, woman and child in the country, the 12-sentence press release explaining that nobody was to blame, but we couldn’t see the report, caused outrage. Turner was obliged to commission a report into the report.
We can hope that this one tells the whole truth, but we’d be wise not to bet on it. A fine analysis in the Sunday Telegraph spells out just how little we have been told so far. Essentially, the official position boils down to this: there were bad decisions, and we’ve banned Johnny Cameron from the City. That’s it.
Sir Fred Goodwin, the RBS CEO, has also been punished, but only by the press. Cameron was a director of RBS and chairman of global banking and markets at RBS, and at the height of the boom, there seemed hardly a single ambitious deal in which the bank was not involved. Yet it’s a travesty to conclude that Cameron managed to bring RBS to its knees single-handedly. It’s also pointless for the new report merely to repeat that many deals went bad, unless by doing so it opens the door to punish the incompetence, shading to negligence, at the top.
We know where the buck should stop, with Goodwin and his chairman, Sir Tom McKillop. We know what broke the bank, the £71 billion takeover, for cash, of Dutch bank ABN Amro. We don’t know why RBS persevered with this disastrous acquisition, although hubris is the obvious guess. After Barclays had proposed its own takeover, for paper, we were into mine’s-bigger-than-yours territory. But it was worse than that. RBS had argued that ABN owned a useful regional bank in the US, which would fill the hole in the doughnut of RBS’s own operations there. That much, at least, made sense.
Yet no sooner had RBS bid than we learnt that the bank had been sold. The only logical justification for this vast outlay disappeared. At that point, the RBS board had the perfect face-saving opportunity to pull out. This is not hindsight. Some of us wrote at the time that any sense the deal might have made had now gone. The justification immediately switched to the attraction of ABN’s wholesale banking business, which up to that moment, hadn’t even been mentioned.

Worse was to come. Bank Santander, RBS’s partner in crime, as it were, had spotted a little Italian gem in ABN’s portfolio. In the carve-up, Banca Antonveneta had been valued at E5 billion. Within days, Santander had sold it on to Monte die Pashi di Siena for E9 billion. RBS looked even more stupid.

Where do we go from here? RBS is a government pensioner for the foreseeable future. This presents a golden opportunity to refashion commercial banking into something socially useful, as Turner himself might put it, serving the UK economy rather than the other way around. The row over bonuses is still cooking, and the government should act before public anger boils over. As for the RBS directors, who presided over Britain’s greatest financial disaster, barring all of them from holding directorships would be a modest punishment. They must hope there is nothing in next week’s report to warrant something worse.