Letter from the Financial Services Consumer
I am writing to you regarding the Treasury Committee's
interest in Equitable Life, on behalf of the Financial Services
Consumer Panel, the independent advisory body set up by the Financial
Services and Markets Act to represent consumers.
As you know, several bodies are considering
the lessons to be learnt from the Equitable Life affair. The Financial
Services Authority's report will cover the FSA's role in regulating
Equitable since January 1999 and the Personal Investment Authority's
role as a self-regulatory organisation. The Institute of Chartered
Accountants will consider the roles of members or member-firms
who have been connected with the provision of professional services
to or the management of Equitable Life. Similarly, the Institute
of Actuaries inquiry is considering the adequacy of professional
The findings of all these investigations will
be important, but none of them is looking into the role of the
regulators before 1999. There is therefore a serious gap in the
scrutiny of the events that led up to Equitable Life's closure
to new business. The Panel's view is that this omission is likely
to lead to an incomplete analysis of the causes of the Equitable
Life crisis, and that important lessons therefore might be missed.
In answering a question from John Butterfill
MP on 26 January about whether the Chancellor would make a statement
on Equitable Life, the Economic Secretary, Melanie Johnson MP,
replied that the FSA are preparing a report. Yet it is clear that
the FSA's report will be limited to reviewing their own part in
the story. The Consumer Panel is taking a close interest in the
FSA report, but we are keen that there should also be an accurate
account of earlier events and that the actions of the previous
regulators, the Treasury and the Department of Trade and Industry,
should be reviewed.
We encourage you, therefore, to consider all
the events that led up to the Equitable Life's closure, and to
examine the actions of all the relevant regulators, starting with
the earliest decisions regarding the guaranteed annuity liabilities.
We think this will be essential to delivering meaningful conclusions
about what should have been done, by whom and when, to prevent
the present crisis.
30 January 2001