The Financial Services Authority deserves high praise for publishing an excoriating study into its own failure adequately to regulate Northern Rock, the mortgage bank that had to be nationalised after a run by customers last summer. The FSA must now learn the lessons of its own report - something it did not do in the past when supervising Northern Rock - but the FSA's failure to implement its risk-based approach to regulation does not mean the approach itself is flawed.

Yesterday's report is a catalogue of internal failures: Northern Rock was passed between three heads of department in the space of a year; financial analysis of the bank was inadequate; risks identified in the FSA's own Financial Risk Outlook did not feed into supervision of Northern Rock; ongoing meetings with the bank were few and poorly documented; and FSA management lacked the information to challenge Northern Rock's supervisors.