FCA chairman John Griffith-Jones has responded to concerns expressed by the Chancellor over the regulator’s handling of its announcement of the review into closed book policies.
Yesterday Chancellor George Osborne wrote to Griffith-Jones to express “profound concern” over the FCA’s handling of the issue and set out expectations for the scope of its investigation into the matter.
Responding to Osborne, Griffith-Jones says: “I would like to assure you that at the meeting last Friday, the board of the FCA shared similar concerns to your own about the events themselves as well as the potential impact on the FCA’s and UK’s reputation in financial services.
“As we announced last week, we intend to do everything possible to address that harm by setting up an independent inquiry.”
He adds: “I am determined to understand the FCA’s role in the events of Thursday and Friday. I am already in discussion with your officials on the arrangements and terms of reference for the review, which will be done by an external legal firm and will be independent of the executive.
“We will ensure that all the issues raised in your letter are reflected in the terms of reference of the inquiry.”
The Daily Telegraph first reported on 28 March that the regulator is concerned legacy customers are locked into poor investments by steep exit fees, and insurers may be “exploiting” them by levying large fees to subsidise other parts of the business.
The report prompted several insurers’ share price to plummet, including Resolution, Legal & General, Aviva and Phoenix.
The regulator was forced to issue a clarification statement at 2.30pm explaining the scope of the review in more detail.
At 6.30pm, the FCA issued a further statement that it would carry out an investigation into its handling of the issue, with the involvement of an external law firm.
FCA chief executive Martin Wheatley admitted earlier this week that its handling of the announcement into the closed book probe was not the regulator’s “finest hour”.