At first glance, the Financial Services Authority's review of its own role in the Northern Rock saga reads like a brilliant self-parody. One wonders for a moment whether the author, in a mad moment of Swiftian mischief, has deliberately set out to portray her colleagues as a bunch of Pooterish pen-pushing, paperclip-counters.

There is the slavish and pedantic attention to the trivial detail. “We reviewed 129 files [lever arch or equivalent] ...” the report proudly assures us early on.

There's the blizzard of confusing acronyms — MRGD, ARROW, RMPs, C&C, IRMs and HoDs.

There's the reluctance to call a spade a spade. “The supervision of Northern Rock was at the extreme end of the spectrum of the supervisory practices we observed.”

There's the absurd faith in frequency of meetings as the FSA's measure of effective supervision. The more the better, obviously.

There's the obsession with inanimate systems and processes rather than people. Reading the executive summary (we don't get to see the full report for another month), one gets no impression at all that the FSA is staffed by 2,000 educated and thinking human beings — people, we might hope, attuned to the currents in financial markets, understanding of the temptations that might persuade bankers to make reckless decisions and capable of bringing common sense, brainpower and personal judgment to the regulatory process.

And there's the bureaucrats' refusal to accept that there is anything fundamentally wrong with the organisation or its philosophy. Or at least nothing wrong that hiring a few more administrators can't solve.

The report is not a whitewash, however. Indeed, by its own lights, the FSA is brutally self-critical. It blasts itself for its lapses of officialdom — the failure to keep good records, the paucity of meetings, the glitches in line management procedures.

As such, the FSA risks being accused of abject hypocrisy. These are just the failings it cannot tolerate in the firms in regulates. Poor record-keeping is high up in the FSA's hierarchy of deadly sins.

But the wider message from the report is that the FSA does not try to run a zero-failure City and that the Rock implosion and run would probably have occurred even if the FSA had been operating as it would have liked. Perhaps FSA officials could have impressed their concerns more forcibly on Rock directors, perhaps the bank would have been advised to diversify its funding a bit more, but nobody at Canary Wharf seems to be terribly convinced this would have made a difference.

FSA officials have admitted privately that they would have been unlikely to exert their powers to force Rock to change its ways in those benign, pre-2007 credit market conditions.

In short, but for the shortcomings in depositor protection, Rock was, in the eyes of the FSA, just one of those unfortunate things — an inevitable rare failure, but a price worth paying for a system in which competition and innovation are allowed to flourish for the benefit of customers.

It will be a few decades before we know if this is a fair assessment. Any more bank collapses and the FSA's private view that this was a once-in-two-centuries probability event will sound very hollow. Anyway, it is much too early to argue that the price is worth paying when we don't yet know what that price (for taxpayers) will be.

patrick.hosking@thetimes.co.uk

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