Sir David Walker and Bill Knight, the two experts appointed by the Treasury Select Committee (TSC) to examine the report of the Financial Services Authority (FSA) into the collapse of the Royal Bank of Scotland (RBS), have given evidence to the TSC. David Ruffley MP has asked them to pinpoint the specific actions taken the CEO of RBS and other individuals that led to RBS' demise. The transcript of David's exchange with the two experts can be found below:

Q73 Mr Ruffley: Sir David, you have answered in response to Michael Fallon that you think the report does amount to a censure of the chief executive, Sir Fred Goodwin, and Mr Knight has referred to bad decisions that he said were bad or wrong, even with the benefit of hindsight, that the board as a whole made. Could you just refresh our memory to the actions that you believe Sir Fred Goodwin took that are outlined in this report that amount to something that warrants a censure. So, in short, what are the things that Sir Fred Goodwin did that lead you to the conclusion he is being censured in this report? ABN AMRO, the decision to force that through, what else?

Sir David Walker: The thing that I would go back to was the matter we did raise with enforcement, as I mentioned earlier, which was delegation by the chief executive. The chief executive of an entity like RBS-this is relevant to the ring-fencing question that has been mentioned by others-can't possibly have a detailed knowledge of all the silos of specialism that the entity is engaged in. What the chief executive is required to do, if he is performing effectively, is to choose people to whom he can delegate with total dependability and, in my view, it was a very important question whether the discharge of that responsibility was fully adequate. The conclusion reached by the enforcement team was that there was not a sufficient failure of competence there to justify an enforcement action, but I think there is still a question about the performance there. It is relevant that-and this is mentioned in the report-the view taken by an outside professional subsequently, I think a head hunter, was that Johnny Cameron would not be someone who would be regarded by head hunters as suitable for the role that he was asked to discharge if the question came up now.

So I would think that going back well before ABN AMRO there were questions about the trust, the confidence, the judgment the chief executive was making about individuals in the team that were reporting to him. That is quintessentially a responsibility of the chief executive. As we say in our document, of course, it is for the chief executive on matters like that to consult appropriately with the board and seek the chairman's view: is this guy the right person to have in this role? But ultimately, the board needs to support the chief executive in those judgments, and if it is not ready to support him, the board has a problem with the chief executive. So the sense in which there is censure here is that those judgments were made clearly by the chief executive, but in many of them that confidence was proved to be misplaced. That relates to failures of a flow of adequate management information; for example, failures of adequate risk assessment. To give a specific example, when the decision was taken in 2006 by the board to embark on a significant P&L revenue strategy in the credit trading space, not thinking about leverage, not thinking about balance sheet or asset quality, the board were not presented with adequate risk information, the kind that would now-

Q74 Mr Ruffley: You see that as a shortcoming of Sir Fred, one example?

Sir David Walker: Well, he was responsible for the whole structure that presented this to the board, yes. So there are a number of things of that kind that, cumulatively, in my opinion, amount to poor judgment even by the standards of the time, which were lower than standards are now.

Q75 Mr Ruffley: Just before I move finally onto another subject, Sir David, wearing your hat as a very distinguished practitioner in the City of London, can you cite any examples of individuals being stripped of their knighthoods-not for malpractice, let me put it another way-for being censured?

Sir David Walker: No, I don't but I do not know that I would know, Mr Ruffley.

Mr Ruffley: No, but you are a City practitioner. We aren't around this table. It is not something that you have come across before?

Sir David Walker: There are cases historically.

Mr Ruffley: That is what I am asking.

Sir David Walker: The answer is I don't know.

Mr Ruffley: Does Mr Knight know?

Bill Knight: No, I don't. I can't think of any.

Q76 Mr Ruffley: Can I just turn to the report. It does indeed criticise certain FSA methodologies and policies, but what it lacks is any specific reference to mistakes that individuals in the FSA made at the senior management level. Why is this?

Bill Knight: It does not specifically identify people below very senior individuals in the FSA, that is true.

Mr Ruffley: Those who were making some of the decisions on a delegated basis; any particular reason for that?

Bill Knight: The truth is that the major mistake, which is that the conclusions drawn by the FSA, which the evidence that we have seen supports, is that, by and large, officials were doing what was expected of them. It was what was expected of them that was wrong and, therefore, the responsibility has to lie at the top of the FSA. There are one or two exceptions to that, but they are not dramatic. The real problem is with the rulebook itself and with a decision, taken in April 2007, not to intervene in the ABN AMRO acquisition, which in such a massive transaction has to be a matter I think-

Chair: Can you speak up, I am sorry-

Bill Knight: It has to be a matter for the top of the FSA. So my understanding of this is that there are no terrible crimes committed by people in the FSA.

Q77 Mr Ruffley: A final question for you, Sir David. Is there anything you have seen, in the course of your review, which would suggest not only that the FSA was perhaps under-performing but also that Her Majesty's Treasury senior officials were asleep at the wheel or under-performing, as well as individuals at the Bank of England? In short, do you think there should be a review of some description as to what the senior officials at the Bank and at the Treasury were doing during this time period?

Sir David Walker: I have nothing to say about the Treasury, and the Chairman will be able to reproach my lack of independence because I was there for 16 years.

Mr Ruffley: Although not, thankfully, during this time.

Sir David Walker: Not during this period. Vis-à-vis the Bank of England, the only thing I would say, which is I would like to think a constructive criticism and it is certainly intended as such, is that if you look at the reviews on what we would now call financial stability produced by the Bank of England in the period before the crisis, they were very perceptive. The criticism I would make is not that they were not perceptive but that they were not hammered home hard enough. This goes back to the questions that Ms Leadsom was asking earlier. Serious people were saying, "This can't go on and there are risks", and they were people that were huge in their professional integrity, competence, and all the rest, who should have banged the drum louder. So, if I have criticism, perhaps the Bank did not make enough noise about its concerns. Of course, the architecture then is not what the architecture is about to become with an FBC and all that.