By David Williams
26 October 2009
Local government and financial sector regulators have come under renewed fire over last year’s Icelandic banking collapse.
Phyllis Starkey, chair of the Commons communities and local government committee, said that the Financial Services Authority had been ‘unhelpful’ and had not taken responsibility for its role in the crisis.
Speaking at the annual CIPFA conference on treasury management on October 22, Starkey revealed that the FSA had responded ‘less than positively’ to the committee’s report on the affair, published in June.
The committee will publish formal responses from CIPFA, the FSA, the Audit Commission and the government on October 28.
Starkey criticised the FSA for being unclear on whether it should have been regulating treasury management advisers, which have been blamed for giving councils wrong advice on Icelandic banks leading up to the crash.
She warned that many local authorities were still failing to spread their investment widely enough, and recommended that smaller councils pool their treasury management expertise.
Starkey also told delegates that the Audit Commission should have issued guidance to councils before the banks – which had around £1bn of British public money invested in them – failed.
‘The Audit Commission did issue new guidance after the Icelandic banking collapse,’ she said. ‘We felt that showed very clearly that there were questions the commission should have asked before, to make sure that authorities were at least following their own procedures – many of them were not.’
However, she also maintained that the ultimate responsibility rested with the council.
But David Caplan, director of research at the Audit Commission, hit back. Speaking at the same event he told delegates: ‘You can’t export accountability to the appointed auditor... it’s not the auditor’s fault when things go wrong.’
He later told Public Finance that auditing was essentially retrospective, and that the primary role of the auditor was not to stop accidents before they happened.
26 October 2009
Local government and financial sector regulators have come under renewed fire over last year’s Icelandic banking collapse.
Phyllis Starkey, chair of the Commons communities and local government committee, said that the Financial Services Authority had been ‘unhelpful’ and had not taken responsibility for its role in the crisis.
Speaking at the annual CIPFA conference on treasury management on October 22, Starkey revealed that the FSA had responded ‘less than positively’ to the committee’s report on the affair, published in June.
The committee will publish formal responses from CIPFA, the FSA, the Audit Commission and the government on October 28.
Starkey criticised the FSA for being unclear on whether it should have been regulating treasury management advisers, which have been blamed for giving councils wrong advice on Icelandic banks leading up to the crash.
She warned that many local authorities were still failing to spread their investment widely enough, and recommended that smaller councils pool their treasury management expertise.
Starkey also told delegates that the Audit Commission should have issued guidance to councils before the banks – which had around £1bn of British public money invested in them – failed.
‘The Audit Commission did issue new guidance after the Icelandic banking collapse,’ she said. ‘We felt that showed very clearly that there were questions the commission should have asked before, to make sure that authorities were at least following their own procedures – many of them were not.’
However, she also maintained that the ultimate responsibility rested with the council.
But David Caplan, director of research at the Audit Commission, hit back. Speaking at the same event he told delegates: ‘You can’t export accountability to the appointed auditor... it’s not the auditor’s fault when things go wrong.’
He later told Public Finance that auditing was essentially retrospective, and that the primary role of the auditor was not to stop accidents before they happened.
