The FSA's Supervisory Enhancement Programme, in response to the Internal Audit Report on supervision

The FSA's Supervisory Enhancement Programme, in response to the Internal Audit Report on supervision of Northern Rock High-Level Summary 1.1 As we have already made clear in our evidence to the Treasury Select Committee, the failure of Northern Rock should first and foremost be attributed to the failure of its board and executive to create a durable funding model which could withstand the exceptional set of market circumstances that occurred in summer 2007. Nevertheless, the FSA acknowledges that its supervision of Northern Rock in the period leading up to July 2007 was not of sufficient intensity or appropriate rigour to challenge the company's board and executive on their risk management practices and their understanding of the risks posed by their business model. 1.2 The FSA's senior executive management committee (ExCo) therefore commissioned an Internal Audit review of lessons learned from the supervision of Northern Rock between January 2005 and July 2007. The report has been made first to the Audit Committee of the FSA Board and then to the Board itself. ExCo accepts the conclusions and resultant recommendations of the review and is today publishing the principal conclusions. The FSA Board agrees the steps now being taken by the Executive. 1.3 In parallel, the Tripartite Authorities have carried out a review of the market events between August and December 2007, which has resulted in proposals for enhancing the general framework ...