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Davies tells MPs to blame arrogant Equitable, not FSA

FSA chairman Howard Davies slammed the Equitable Life board this week over its “arrogant superiority”and resistance to the regulator&#39s attempts to intervene in the guaranteed annuity rate debacle.

Speaking to the Parliamentary Treasury select committee this week, Davies said the troubled life office did not act in a manner expected. It did not consult or even inform the regulator before it made the decision to resort to court action against guaranteed annuitants in 1999.

In his harshest criticism of the old Equitable board yet, Davies said: “The company resisted us at every turn. We are dealing with a company that had an arrogant superiority, that did not deal with the regulator in the way that we would expect.”

The Parliamentary Ombudsman announced its own inquiry this week into the FSA&#39s handling of the Equitable crisis from January 1, 1999 onwards to decide if policyholders have suffered “injustice as a consequence of maladministration by the FSA”. This could open the way for compensation.

Despite aggressive questioning from Conservative committee member David Ruffley about the “severely bad” legal advice the FSA received, Davies refused to criticise his legal team, saying he had confidence in them.

While acknowledging failings, Davies said the regime which restricted the regulator was at the root of much of the problem and that this would change after N2.

Committee chairman John McFall asked Davies to bring FSA director of insurance firms Martin Roberts with him for the next evidence session.

At the meeting, Treasury economic secretary Ruth Kelly said it is the FSA, not the Government, who must be held accountable for regulatory failings. She said it was not the role of the Treasury to second-guess the professional decisions made by the FSA. “They are the ones which have had to take the decisions, they are the ones that have to be held accountable,” she said.

Kelly confirms that the 1 per cent cap on stakeholder charges could be reviewed by the Treasury. In an interview in Money Marketing this week, she said the 1 per cent cap is not set in stone.

Kelly interview, p9


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