Kaupthing bank 'run in a very strange way'
Updated on 03 February 2009
MPs are told that Kaupthing, the Icelandic bank which collapsed last year, was run in "a very strange way" and that the FSA should have taken action.
Tony Shearer was chief executive of the UK bank Singer & Friedlander in 2005 when it was taken over by Kaupthing. He was questioned by MPs at a treasury select committee hearing today.
At the time he told the FSA, the banking watchdog, of his doubts about the way the bank was run. But he was unable to block the takeover as the cash offer was too good for shareholders to resist.
Responding to Mr Shearer's evidence, one MP said, "This seems to be damning criticism of the FSA". Another said to Mr Shearer, "You seemed to take every step you thought was reasonable to raise the point that these people in Kaupthing - the bank that was going to buy your bank - were not fit and proper to run a UK bank."
Mr Shearer told the committee he had had one phone call with the FSA and had had one meeting at which he, a number of his directors, four professionals from the FSA, and his law firm Slaughter and May were present.
He said there had also been other meetings between April and August of 2005, when the takeover of Singer & Friedlander was completed.
Summing up, one MP asked Mr Shearer if he had been shocked that the FSA did nothing, and Mr Shearer said no. But he agreed that the FSA should have taken more action.
Last year the head of the FSA told the same treasury committee that Northern Rock had been its only instance of regulatory failure.
The FSA has said the evidence given today was not accurate.
FSA statement:
"It would be our usual practice to talk to the directors of a financial institution going through a 'change of control' i.e. when an authorised firm is acquired by another.
"In such circumstances the FSA always conducts 'change of control' checks and only approves the change if we are satisfied our requirements will be met.
"It is not our practice to discuss individual firms but, in this instance, we do not believe the statement made to the Treasury Select Committee represents an accurate summary of the events."
