MPs hear of warning on governance at Kaupthing Singer & Friedlander
by Gill Montia
The former chief executive of Singer & Friedlander (S&F) has appeared before the Treasury Select Committee, which is investigating the circumstances surrounding the UK banking crisis.
When questioned by MPs Tony Shearer revealed that when the investment bank was acquired by Kaupthing in 2005 (to become Kaupthing Singer & Friedlander) he warned the Financial Services Authority (FSA) that the new owners were not “fit and proper” to take ownership of a UK bank.
According to a BBC report, Mr Shearer’s concerns centred around a lack of international banking experience and an examination of Kaupthing’s accounts for 2004, which showed that directors had borrowed £19 million to invest in shares in Kaupthing.
In addition only 10% of the bank’s profit came from conventional banking compared with around 50% from investing in the financial markets.
Mr Shearer resigned from Kaupthing Singer & Friedlander shortly after the merger and in the autumn of last year, Kaupthing collapsed and was nationalised by the Icelandic authorities.
At the time, the UK Government seized control of KSF; around £2.5 billion in savings with KSF’s retail deposits business, Kaupthing Edge, were transferred to ING Direct, the e-savings division of Dutch group ING.
The FSA has so far responded to reports by saying it believes the statement made to the Treasury Select Committee by Mr Shearer does not represent an accurate summary of the events.
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