Poor management decisions and the last Labour government’s light-touch regulatory regime were key factors in the near-collapse of Royal Bank of Scotland, a long-awaited report by the City watchdog said today.

The Financial Services Authority (FSA) highlighted deficiencies in the management, governance and culture at RBS and said that the deal which effectively broke the bank - the £50bn takeover of Dutch bank ABN Amro - was carried out with inadequate due diligence.

However, it also highlighted its own short-comings in the lead-up to the collapse, saying it operated a flawed supervisory approach which failed to challenge the management of RBS.

It added: "This approach reflected widely held, but mistaken assumptions about the stability of financial systems and existed against a backdrop of political pressures for a ’light touch’ regulatory regime."