The Committee’s report claims the FSA ‘failed to provide the necessary level of supervision’ but this statement has no basis of fact and the report contains no facts to substantiate this assertion.
In respect of commercial lending, the FSA made specific warnings to the building society sector in March 2003, May 2004, May 2006, October 2007 and again in May 2008 regarding the importance of managing the quality of lending books. These warnings covered the risks of commercial property, buy-to-let, self-certification and sub-prime lending as well as mortgage book acquisitions.
In respect of the Dunfermline, an FSA supervisory ‘ARROW’ visit in November 2005 raised commercial lending as an issue with the Society’s management, which resulted in an independent consultant being appointed by Dunfermline and controls being tightened. When liquidity problems became an issue in 2007, the FSA was in regular contact with the Society’s management and was requesting liquidity data on a weekly basis. The FSA’s supervisory team continued to work with the society on its capital and liquidity issues until the time the resolution process was triggered in March 2009 and strongly refutes any notion that it failed to adequately supervise the Dunfermline.
The FSA has already published full details of the specific actions it took, in a letter to the Chancellor of the Exchequer on 17 April 2009, published on the FSA website at http://www.fsa.gov.uk/pubs/other/response_Dunfermline.pdf
