Sir Callum McCarthy

Sir Callum McCarthy chaired the FSA between 2003 and September 2008.

Before his FSA stint, he was active in political life, becoming Director-General of Ofgas in 1998, then chief executive of super-regulator Ofgem in 1999. In 2003 he was knighted for his services to the financial sector; this was also the same year he took up his post at the FSA.

He was Chair of the FSA during the run on Northern Rock, and he has been criticised as under his watch the FSA focused on protecting the public against abuses on retail products such as misspelling, while it should have been examining activity in the wholesale markets. Just a month before the credit crunch, the FSA approved a capital-adequacy ratio for Northern Rock that allowed it to raise its dividend by 30%, even though there was no money to pay it.

Once the problems became evident, the FSA was slow to ask the Bank of England to step in as last-resort lender, and slow to realise the risk of a run. Finally, it has been alleged that the FAS took too long to realise that the same credit crunch that caused the problem would also hinder a market solution.

The FSA has also been criticised for its lack-lustre approach during the downfall of the Royal Bank of Scotland. In its own report on the issues (11 Dec 2011) the FSA says: “The FSA’s overall pre-crisis supervisory approach was inadequate with, in retrospect, an overly reactive approach and insufficient data available to supervisors to assess prudential risks fully.”

The Banking Standards Commission said the Financial Services Authority (FSA), appeared “to have taken no steps to establish whether the former leaders of HBOS are fit and proper persons to hold the approved persons status elsewhere in the UK financial sector”.

Get the latest news from Promoting Economic Pluralism: