Regulator should have stopped RBS from buying ABN Amro, say MPs Allowing RBS to acquire ABN Amro was a significant failure of oversight by the Financial Services Authority, even taking into account the 'light-touch' environment prevailing at the time, MPs have concluded. The Financial Services Authority could and should have intervened to block Royal Bank of Scotland taking over Dutch bank ABN Amro, the Treasury select committee has said, in a report that makes a "serious indictment" of the former management of the City regulator. The £49bn deal is one of the factors that led to the £45bn taxpayer bailout of RBS in October 2008, because it squeezed the bank's capital buffers to wafer-thin levels and exposed it to more troubled loans. in the committee's response to last year's FSA report into the collapse of RBS, Andrew Tyrie, its Conservative chairman, called for the new Prudential Regulation Authority being spun out of the FSA to be given powers to approve major mergers and acquisitions. Hostile takeovers might also need to be banned, he said. "There are early, encouraging signs that, in the PRA, judgment-based regulation is doing more of the heavy lifting than the FSA's failed culture of box-ticking," said Tyrie. When RBS first announced it wanted to take over ABN Amro in early 2007, John Tiner was the FSA's chief executive. He was replaced by Hector Sants, who had been overseeing the wholesale division, in July 2007. The chairman at the time was Sir Callum McCarthy, who was replaced by Lord Turner in September 2008. The committee said that the FSA's report painted a picture of a "severely unbalanced regulator" and that even though the international mood at the time was in favour of a "light touch" approach, the regulator's management should have done more. "The FSA report describes failures and inadequacies in the regulation and supervision of capital, liquidity, asset quality and a failure appropriately to analyse the risks relating to the ABN Amro acquisition," the committee's report says. This is a serious indictment of both the senior management and leadership and in particular the chairman and chief executive in place at the time and their predecessors, regardless of the prevailing assumptions and political pressures. While Sants was in charge of the FSA when the ABN Amro deal finally went through in the autumn of 2007, the report states: "[The FSA] should have intervened at an early stage. It should and could have intervened at a late stage, albeit with more difficulty. The committee also concluded that it was a "matter of considerable surprise" that nobody, with the exception of former investment banking head Johnny Cameron, has been "held meaningfully accountable" for the failure of the bank. Cameron has agreed not to run a bank again even though the FSA has decided not to pursue any disciplinary action against him. Tyrie also criticises Turner - a candidate to be the next governor of the Bank of England - for his initial reluctance to publish a report into the collapse of RBS but also acknowledged his cooperation later on. The FSA said it had "put in place a completely new model of supervision since the financial crisis in addition to major changes to the capital and liquidity levels firms are required to hold."