FSA caves in to RBS pressure (sort of)

FSA chairman Lord Turner has tried to diffuse the storm of criticism the regulator has received for its decision not to publish PwC's report into the fall of RBS: he's promised Andrew Tyrie, the head of the Treasury Select Committee, that the FSA will produce its own version of the report in March. But since RBS's current and past directors will have power of veto over whatever gets published, it'll be hard to avoid the whiff of whitewash...

Turner continues to insist that legal confidentiality rules prevent him from publishing PwC's original report - even though most commentators, politicians and even lawyers appear to disagree. But, presumably as a result of the fortnight of grief he's had since making this decision, he's now promised Tyrie that the FSA will instead publish its own report, based on PwC's findings. It won't be a 'blow-by-blow account', he says, but a 'clear description of any key failings', by either RBS or the FSA itself. The plan has got the thumbs-up from Business Secretary Vince Cable (who may or may not have been applying the thumb-screws behind the scenes).

Unfortunately, there's a catch. Anything the FSA publishes will require the consent of the RBS board, past and present. And the inevitable worry is that by the time it comes up with anything that RBS is happy to see in the public domain, it'll be so censored and watered-down that it won't really tell us anything useful.

What's more, according to Turner's letter to Tyrie, RBS has thus far made it pretty clear that it has no intention of providing that consent. So the question will be whether the bank can be leaned upon sufficiently to make it play ball. Turner's public letter is presumably the first stage of that process; and Tyrie himself has just published an open letter to RBS boss Stephen Hester encouraging him to 'actively engage' with the FSA so they can produce a report that's 'as comprehensive as possible'.

The political pressure - on what is after all a state-owned bank - will be such that RBS will be unable to opt out of this process altogether. But as long as PwC's report remains in Turner's safe, and the RBS directors have the opportunity to resect the most critical bits, it's going to be hard for the FSA to convince the scpetics that its report represents the full unvarnished truth.