LONDON, Feb 3 (Reuters) - British politicians said on Tuesday they would probe further into the 2005 takeover of Singer & Friedlander Group by the now collapsed Icelandic bank Kaupthing after a former executive said he warned the regulator about the deal.
Treasury Select Committee Chairman John McFall said he would write to ex-Singer & Friedlander directors after the bank's former chief executive Tony Shearer told lawmakers he had warned British regulators to block the takeover.
A committee spokesman said the former directors would not be called to give verbal evidence.
Shearer, who left after the takeover, said he warned the Financial Services Authority (FSA) that Kaupthing directors were not "fit and proper people to control a UK bank".
"I believe that the FSA had sufficient information about Kaupthing, that they should never have approved the change of control, and if they were to do so they should have made extensive further enquiries," he said in a written submission to the committee.
Shearer told the cross-party group that his main concerns centred around Kaupthing's 2004 accounts which revealed directors had borrowed 19 million pounds ($27.04 million) in order to buy shares in their own company.
"I had serious doubts about them right from the start," he told the committee.
He added that further alarm bells should have rung with the FSA when both the heads of risk and compliance of the merged bank were sacked for voicing concerns about the way that the company was being managed and "specifically about its attitude to risk".
These concerns were shared by most of the Singer & Friedlander board and were passed to the FSA in April 2005, but the regulator "rushed" through approval of the takeover, he said.
However, the FSA said it had made a full assessment of Kaupthing, including a consultation with Icelandic regulators who had said there was no reason for the deal not to proceed.
"In addition, as part of the change of control process, we required Kaupthing to take a number of actions to address governance issues in London, including the appointment of independent non-executive directors. The application was processed within our normal time frame, it was not 'rushed through' as Mr Shearer claims," the FSA said in a statement.
Kaupthing was taken into state ownership last year as Iceland's banking sector went into meltdown.
The British government had to put Kaupthing Singer & Friedlander into administration in October to protect UK depositors, many of whom had savings via Internet accounts. ($1=.7027 Pound) (Reporting by Frank Prenesti; editing by Simon Jessop)