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&#39FSA believed Equitable Life&#39s confident claims&#39

Appalling communications and an information vacuum between the regulator and Equitable Life led to the Equitable debacle, according to the FSA.

It says the “die was cast” well before it took over regulating Equitable in 1999 but the internal report by Ronnie Baird admits there are a “number of things which the FSA could have done better”.

Now all eyes are on the independent Penrose inquiry which will look at all parties involved as far back as the 1950s.

The report says although the regulator was aware of Equitable&#39s reserving policy, Equitable managed to paint a satisfactory picture of its financial situation and did not always provide the regulator with full information.

It says Equitable did not mention that the reinsurance cover used in 1998 to bolster reserves would fall through if it had to change its bonus policy. The agreement was not signed until late 1999 but was included in its 1998 returns.

The regulator failed to communicate the situation properly internally and was too ready to believe Equitable&#39s promises. Staff were not always clear on what action to take, if any.

It also failed to prepare for the possibility that Equitable might lose its GAR case in the House of Lords. Closer scrutiny at an earlier stage would have helped but the FSA did not have enough information from Equitable and was swayed by the society&#39s confidence.

Income Drawdown Bureau managing director Ronnie Lymburn says: “You have to now ask questions of the DTI and its role. The FSA is not off the hook yet. The new Equitable board is determined to pursue claims against anyone involved.”


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