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Whistleblower slates FSA over building societies

May 10, 2009 by admin  
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A whistleblower who has chosen to remain anonymous due to fears over legal action has slated the UK’s financial regulator, the Financial Service Authority, over its lack of action with regards to building societies venturing into risky areas during the credit boom. The FSA has been accused of ‘apathy and complacency’ by the whistleblower, who was a former supervisor with the authority.

The FSA stands accused of ignoring warnings over building societies purchasing books of risky, self certified loans. The former supervisor also added that building societies had been left to venture into other high risk areas such as buy to let mortgages, leaving them more vulnerable. Liberal Democrat Treasury spokesman Vince Cable has been looking into the claims, and has written to the chairman of the FSA, Lord Turner, about what he described as a ’scathing indictment’ of regulatory failure.

However, an official from the FSA said: ‘The description of our approach to regulation of building societies bears no relation to reality other than the fact, as we have said many times, that our general approach to supervision was less focused on business models leading up to 2007 than it has been since.’

The accusation came just shortly after ratings agency Moody’s lowered its ratings on nine building societies as a result of further potential damage to their finances stemming from high risk ventures.

The former supervisor stated: ‘Trusting and naive’ provincial building society chiefs were ‘eaten alive by cynical, rapacious and short-termist investment bankers.’

Vince Cable added: ‘These were bodies that were formerly very safe and solid and conservative in the way that they operated and they started getting into high-risk activities.’

Tags: Democrat, credit boom, treasury, fsa, regulation, building societies, Financial Service Authority, lord turner

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