THE Royal Bank of Scotland has become a dirty word to its shareholders, its employees, 27,500 of whom have lost their jobs, its customers and the British taxpayers who funded the £45.5 billion rescue of the bank and have suffered a £25 billion loss.

The report by the Financial Services Authority (FSA) into the bank's failure highlights deficiencies in RBS's management, governance and culture that are obvious with the benefit of hindsight. Nearly four years on from the first intimations of disaster, however, its purpose must be to ensure that the regulatory regime is sufficiently robust to prevent a repeat.

The lingering public anger about the failure of those who ran the bank that was too big to fail is perfectly legitimate. The Financial Services Authority (FSA), however, while describing some decisions as poor or mistaken, specifically draws back from saying either RBS or any individual was guilty of any regulatory breach. Many will find that unsatisfactory but it correctly refocuses attention on the effectiveness of the regulations.

For example, the FSA identified the perceived dominance of Fred Goodwin as chief executive as a risk as early as 2003, four years before the acquisition of ABN Amro catastrophically exposed the bank to the US sub-prime mortgage market. More important than retaliatory shredding of Fred "the shred's" management style is ensuring that a culture of risk-taking is replaced by one of rigorous risk assessment. It appears that under the Goodwin regime any misgivings were seen as contrary to the culture of confidence from previous successes, notably the acquisition of NatWest.

The recommendation in the report that banks should be forced to secure explicit regulatory approval before making any major acquisitions would have been anathema during the "light touch" era but can surely have few opponents now. It will require a firm regulatory authority but the admission by the FSA that it provided insufficient challenge to RBS provides a platform for further reform.

It is entirely reasonable for bank executives to face personal consequences in the case of a failure given the scale of risk that many were willing to take in pursuit of multi-million pound bonuses. Requiring directors to hold more of their pay in a separate account which could be returned to the bank of it got into difficulties and an automatic ban on executive directors of banks that fail from holding such positions againare most welcome measures.

Companies responsible for causing damage to the public through environmental pollution or to individuals through negligence can be held legally responsible and subject to sanction including payment of damages or even imprisonment.

The lesson of the downfall of RBS, one that we are all still suffering since it helped tip the UK into the worst recession since the 1930s, is that individual and corporate responsibility must apply in banks, whose business must be founded on trust.