Speaking at a public administration select committee hearing into Equitable Life yesterday, Davies said he is not persuaded by Abraham’s findings on Equitable Life.
He said he was “very surprised” that he had not been interviewed by Abraham before she reached her conclusions on the regulatory failures of the FSA under his watch.
He also said that it was difficult to make a case for compensating the victims of Equitable Life from the public purse as it was hard to calculate how their losses could be directly attributed to regulatory failings.
When questioned by the committee chairman and Labour MP Tony Wright on whether he accepted the Ombudsman’s findings that there were 10 cases of maladministration by the regulators responsible for overseeing Equitable Life, he said: “Of the ten I can’t comment on the first [five] which applied to a period of which I was not responsible and where I have never seen the papers at all.
“As for the later five I have to say that I do not know what the Government’s response will be.
He added: “I have not been involved with this in any way I have not been interviewed by the ombudsman at all and so I speak against that background of having absolutely nothing to do with this for over five years.
“That said I do not find the five criticisms of maladministration of the FSA during my period there to be persuasive.”
Davies later said he had written to Abraham offering to give his input but by the time they met she had already reached provisional conclusions.
He said Abraham told him the FSA had not wanted her to interview its former staff, but Davies said the FSA denies that this was the case.
Davies said: “I do think that this is unsatisfactory and I do find when I read the description of the regulatory period for which I was responsible that I think it does lack understanding of the dilemmas the regulators faced and what we were trying to do.”
He said he was surprised that Abraham had sought to characterise the mindset of FSA staff in her report without having conducted interviews with them.
When asked whether he deemed her report to be flawed, Davies answered “yes”.
Davies also spoke of the lack of supervisory staff overseeing life offices when the FSA first took over this role.
He said that at the time there were around 35 staff looking after 200 life companies, which was around one third of the staff that the Bank of England had to supervise an equivalent number of banks.