Examination of Witnesses (Questions 1-19)|
TUESDAY 16 OCTOBER 2001
1. Good morning, Sir Howard. You and your colleagues
are welcome to the first hearing of the new Treasury Select Committee.
Hopefully all of us will be courteous but subject you to robust
and real examination. You know that we have a number of themes
we wish to talk to you about this morning, not least your annual
report for the past year, but also relating to issues such as
the 11 September attack, pensions, timely corporate disclosures,
polarisation and others. May I speak first about Equitable Life
and mention a number of things to you. I am sure you are aware
that the Government has given notice of its intention to move
in the House today a Motion for an unopposed return for the laying
before the House of the FSA's report on the supervision of Equitable
Life. In view of this we do not propose to ask any questions this
morning specifically about that matter. However, in view of the
ongoing public interest, we wish to return to it as soon as possible
after the publication of that report. Ruth Kelly, the Economic
Secretary to the Treasury, has already agreed to appear before
the Committee to give evidence on the matter and it would greatly
assist the Committee if you could return to give evidence on the
FSA report on the same morning as her, on Tuesday, 30 October.
Would that date be convenient?
(Sir Howard Davies) That would be fine;
thank you very much.
2. Could you identify yourself and your colleagues
for the sake of the shorthand writers?
(Sir Howard Davies) Good morning. May I say that we
are honoured to be your first witnesses for the new Committee.
The team I have brought with me today is a new team for the Committee.
On my left is Carol Sergeant, who was appointed by the Chancellor
to the Board of the FSA on 1 June this year. She is responsible
for what we call regulatory processes and risk, but that includes
the authorisation functions, all of the enforcement area and also
our Risk Assessment Directorate, which is essentially our strategic
planning function. Carol Sergeant was previously a banking supervisor
in the Bank of England and joined the Authority in 1997. On my
right is John Tiner, who was also appointed by the Chancellor
on 1 June. Immediately before this, John was the head of Arthur
Andersen's global financial services practice and he is now responsible
for what we call the Consumer Investment and Insurance Directorate.
He is responsible for insurance supervision, for the supervision
of all investment firms, the former IMRO, SFA and PIA firms, and
also for our Consumer Relations Directorate and our direct to
consumer work. May I make one introductory remark, because I know
the Committee have a lot of subjects on their minds? We are now
just over a month away from the full introduction of the new regime.
N2 is at midnight on 30 November. The sense of excitement in the
City is palpable. We hope that we are broadly speaking ready for
it in that all our rule books are completed. At the moment what
is going on is that firms are being "grandfathered"as
we call itinto the new regime in that there is no new authorisation
process to go through; if you are authorised under the old regime
you are automatically authorised under the new, but of course
you have to be reorganised in terms of the type of business you
want to do to fit in with the new statutory arrangements. We expect
that all of that process will be completed by 30 November and
at last, four and a half years after the Chancellor's initial
announcement, we shall become fully responsible for financial
regulation. In the meantime, of course, at present we are still
operating under the old statutes but with just a month more of
this transitional regime to go. That was really all I wanted to
say by way of introduction.
3. Thank you and welcome to both your colleagues.
I was going to lead off by asking you what the main developments
have been for the FSA this year to date and in particular whether
you are satisfied that the FSA is ready for N2. I refer to your
very helpful memorandum which you provided for the Committee last
week, where you say, "With N2 nearly upon us, we have been
working hard to ensure our readiness. A lot of work has been completed,
although there is still more to do". You go on in your paragraph
on your new responsibilities during 2002, "Much remains to
be done". What exactly remains to be done and how confident
are you that it can be done?
(Sir Howard Davies) There are three main headings
of work. One is the authorisation work and that is to ensure that
everybody is accommodated in the new regime within the terms of
the new legislation. Carol Sergeant is responsible for that. At
present we think that will all be satisfactorily completed. The
second area of work is the management arrangements of the Authority,
to ensure that we are structured to cope with our new responsibilities.
We implemented a major reorganisation in April, the main point
of which was to realign our organisation structure against the
new legislation and to remove the ancestry of the previous regulators
in that we previously had a part of the organisation which was
called PIA, a part which was called SFA, a part which was called
IMRO. We have now reorganised, primarily to bring together the
regulation of individual firms onto a team basis. For example,
on insurance in future the prudential regulation of insurance
and the conduct of business, the marketing and selling regulation
for an insurance company, will be brought together. I think this
is an important development for the future. That reorganisation
has now been completely implemented and we are equipped in that
sense for the new regime. The third area is the rule books. There
we have produced two fully integrated rule books, both a prudential
one about capital rules and a conduct of business one, about marketing
and selling rules. They are ready and complete and have been properly
made by the Board. However, there are some areas which are still
to be completed because the responsibilities came into the FSA
a little later. The two I think worth mentioning would be the
mortgage regime, where the Government made an announcement somewhat
after the point at which we were merged to say that we would in
future be responsible for the regulation of mortgage lending.
That is still subject to consultation and that in fact will take
effect at a date which we are now calling N3. There will be a
further date at which mortgage regulation becomes a part of our
regime. There is also the question of credit unions, which again
were put into our bucket a little bit later, where we are consulting
on the rules to apply for the regulation of credit unions and
that will come into effect at another date, possibly N4. Beyond
that there are also several areas where we have said that we should
like to review the new regime to see whether it remains fit for
the purpose. We have already said, for example, that in the broking
area we wish to review best execution rules, because the market
is changing, there are different exchanges on which you can undertake
stockbroking transactions and our old rules really presume that
there is one London Stock Exchange on which equity transactions
take place. There is the whole question of soft commissions, which
has been raised by the Paul Myners report, and we are reviewing
the rules on that. The point of the statements in that memorandum
were really to make it clear that N2 is not an end point. It is
a point at which all the responsibilities come together, but we
believe that there is a lot of work to do to reform and update
the system. Our priority for N2 was to create a fit-for-purpose
conglomeration of all the previous rules to allow the system to
proceed, but we have a little list of things which we wish to
review and to examine, possibly to repeal, after N2 and that work
is now ongoing.
4. I shall focus now on the issues affecting
the markets after the 11 September attacks. On behalf of this
Committee may I put on record the work that individuals in the
City have done following that; really heroic deeds have been performed
there, a service not only to their companies but also to the country.
We are very grateful for that. We are aware of a number of measures
which you have put in place since 11 September, for instance a
temporary relaxation of the resilience test for life assurance
companies and the co-operation with firms to resolve their operating
problems. Are you satisfied with the stability of the UK financial
system at the moment? Could you outline for us the actions that
the FSA has taken to assist this market stability? One month on,
do you feel we are now back to normal?
(Sir Howard Davies) I would also agree that there
was a very encouraging rallying round in the City after 11 September
and the animal spirits of the marketif you likewere
subdued for a time in a mood of co-operation and collaboration,
which has been very helpful. It might be helpful if I divide this
into three bits. First of all, there is the question of the market
infrastructure, by which I mean trading systems, settlement systems,
payment systems, etcetera, where in fact we share responsibility
with the Bank of England. The experience of the post 11 September
events was actually quite positive as far as that was concerned.
The London systems worked very well. There was quite a bit of
business from New York which was re-routed through London, which
was handled well and satisfactorily. We had to make some arrangements
to allow that to happen, we had temporarily to authorise people
to transact business of a different kind. We had to waive certain
of our rules to allow companies to have greater exposures to each
other temporarily in order to transact each other's business.
On the whole that work proceeded behind the scenes satisfactorily.
The basic infrastructure of the market stood up remarkably well
and at the moment, while one is always cautious as a regulator
to give anyone a clean bill of health, I am not aware of any infrastructural
issues which remain after 11 September. That was quite a good
story. You ask about the overall health and stability of the system.
It is worth saying that in the case of this kind of event, one
first of all looks to the banking system, which has a particularly
important role. It is important to note that we do benefit from
the fact that we have a very well capitalised banking system in
the United Kingdom, partly attributable to a long period of healthy
growth, but our banks are in a strong position by and large and
are well capitalised and able to cope with financial strains.
We have seen no anxieties about our banking system, which has
been an enormously helpful underpinning. A stable banking system,
which is currently what we have, is something one should never
quite take for granted. The area which has caused the most concern
and focus has been the insurance industry where two things have
come together to create a particularly difficult climate for the
insurance industry. One of course is the implications of the World
Trade Centre attack in itself, which is an enormous event for
the insurance industry. We require the industry to stress test
against disastrous scenarios and one we require them to stress
test against is a collision of two jumbo jets, actually over New
York as it happens; slightly macabre but true. This of course
was even well off the scale, even larger than that in terms of
its overall impact. The overall impact is still very hard to determine
because of the unquantifiable costs of business interruption insurance.
One can say roughly what the building costs are, but there will
be a lot of claims from firms who were not able to transact business,
who lost profit and lost earnings. It is very, very hard to quantify
those. Clearly this would be an enormous hit for the general insurance
market. At the same time, this happened at a time when equity
markets were also falling for quite other reasons, as the world
got used to the idea that we were in an economic slowdown, and
perhaps something worse than that. So the reserve position of
insurers was also weakened by the falling equity market. In the
light of that insurers have been taking a number of steps to strengthen
their financial position. They have been switching out of equities
and into gilt edged stock or other bonds. Quite a major shift
has already occurred: on average the proportion of the portfolios
of life companies in equities has fallen by about eight per cent
this year, which has strengthened their liquidity position. That
is welcome. Life insurance companies have also been increasing
their exit penalties which is not popular but is necessary in
these circumstances. They have also been reducing their bonus
rates, also not popular but necessary in weak market conditions.
What we found immediately after 11 September was that market conditions
became enormously volatile and there were some days when the market
moved up or down by 300 to 400 points between its peak and its
trough on the day. In those circumstances we identified a risk,
that our resilience tests, in other words the requirements we
have on insurance companies to maintain certain levels of solvency,
were risking creating pressure for technical sales which themselves
could take the market down further and create pressure for more
technical sales, so you could end up with a spiral. We looked
at our rules and concluded that there was a case for a temporary
relaxation during this particularly volatile period. The relaxation
took three forms: two of them were measures which we had already
agreed to take on 1 December in the process of reforming our prudential
rules, one of them being the rate of discount to be used for future
equity earnings, where we had been using the dividend rate and
we were shifting to the earnings rate. It was already agreed that
was to take place on 1 December: we brought it forward. The second
one was that we had a stress test which said that insurance companies
should model the impact on their balance sheet of a simultaneous
25 per cent reduction in the equity market and three per cent
rise in interest rates. There have been circumstances in the past
in the British economy where those two things have come together,
but with an independent central bank and a low inflation environment,
we judged that that was an implausible scenario and we had already
consulted on removing that test. The third one was the need to
model at any particular time a ten per cent reduction in the equity
market. We concluded, after some careful consideration, that it
would be sensible to relax that test, but not to relax the requirement
on insurance companies to maintain a prudent margin of assets
over liabilities. That puts the judgement with the company's actuary.
Since we relaxed that test in fact the market has risen quite
a bit and I suspect, though I could not answer for every single
company, it may well be that no company has in fact taken advantage
of that margin, though the odd one might have done at a particular
point on a particular day. We felt it was justified in order to
prevent technical selling. I should emphasise lastly that we do
see this as creating a breathing space for companies, because
there are other measures which they need to take to strengthen
their position. I have mentioned some in terms of the liability
side, bonuses and exit penalties, but also they need to strengthen
their capital position. In some cases these companies are owned
by banking groups who need to strengthen the capital position
of the life insurance company. In other cases they can raise subordinated
debt in the market which also strengthens their capital position.
This is part of an overall picture of a variety of things which
need to be done to increase the robustness and resilience of the
insurance sector in these unusual circumstances and all of those
things are being worked on by individual companies at the moment.
I am sorry that was rather a long answer.
Chairman: We are coming back to that
at a later stage, so some of my colleagues will come in on that.
Some other aspects follow from 11 September, not least the issue
of money laundering. I know in your previous appearance before
the Committee you made some comments on the inadequacy of the
arrangements for the money laundering and with the Government
introducing legislation on money laundering and an international
debate taking place, it is obviously of great concern to ourselves.
5. In your view, how easy is it to launder money
through UK financial institutions?
(Sir Howard Davies) It is more difficult than in most
places, but I could not say that it was impossible. The City of
London is of course the largest international banking centre,
with more international banks in London than in any other place
and considerably more than in New York. That we would normally
regard as a benefit and as a sign of a vibrant and vital international
financial centre, but of course it does mean that London is exposed
to financial flows from many more countries in the world than
any other financial centre is. As one of my colleagues remarked,
if you want to hide a needle, then choosing a very large haystack
is sometimes quite a sensible thing to do. We have to be particularly
vigilant in London, because of the very openness of our financial
system. As a result, we did agree with the Treasury some years
ago that our money laundering regime needed to be strengthened
in that at the moment all we can do at the FSA is monitor the
systems and controls in relation to money laundering in the institutions
we oversee, but we have no responsibility for prosecuting breaches
of those money laundering regulations. The new legislation gives
us the power to do that. We have been preparing for that and over
the last couple of years City institutions have done a lot, because
they have seen this coming since the Bill was published in the
middle of 1998; they can see that there will be this and they
have been strengthening their position. We have been undertaking
a lot more work. I would frankly say that there is still quite
a lot of effort to do before one can be satisfied as one would
like to be.
6. In fact you have been saying for some time
that the system was not as it should be. You told us that when
you were last before us. How long do you think it has been the
case that there have been gaps and weaknesses in the system?
(Sir Howard Davies) There have been weaknesses in
the system. This is an evolving picture and the standards which
are expected internationally on money laundering have been rising
as people have seen the growth of financial crime and of large
sums of money being laundered. We are now thinking about this
in a terrorism context, but until 11 September, if we had been
having this conversation, we would have been primarily talking
about the drug business, for example, which has of course been
the main source of large flows of money laundering, or indeed
arms sales. The standards required have been rising and those
standards are probably best codified in the work done by the Financial
Action Task Force, which is an international body which has codified
a set of principles of good practice on money laundering. I believe
there are 28 of them and the last time the UK was assessed, we
were assessed as being fully compliant with 24 of the 28 good
practices and partially compliant with the other four. The main
gap was in our own rules, which have been corrected as of 1 December,
and also in the regulation of bureaux de change, on which the
Chancellor made an announcement yesterday. For comparison, the
Americans were fully compliant on 17 and partially compliant on
11. I am comfortable that we are in the leading pack in terms
of our money laundering regime, but undoubtedly the changes now
announced are needed in order to get us to the front of the leading
7. How far do you think we can get in terms
of stamping out money laundering?
(Sir Howard Davies) My own and our responsibilities
are to do with the financial system and not to do with the ultimate
financial criminals. Really we see our role as being hardening
the target and the consequence of that is increasing the discount.
How much does it cost you to turn bad money into good money? We
can harden the target. We can make it more difficult for people
to take bad money and turn it into good money through our financial
system. Of course that does not itself deal with the financial
crime and therefore we are only part of the picture and we liaise
closely with the National Criminal Intelligence Service because
we can harden the target and we can also produce intelligence
which we then hand over to the criminal intelligence services
and it is then for them to take action on it and deal with what
we call in the jargon the predicate offence. We are target hardeners,
trying to make it more difficult for people to use our financial
8. Following 11 September and its aftermath,
do you now expect this to be a larger part of your job at the
FSA than hitherto?
(Sir Howard Davies) We certainly expect that, indeed
you were kind enough to remember that we had this discussion in
the Committee before. We have chosen to undertake a variety of
what we call regulatory themes and in our first set of themes
for last year money laundering was one of the first themes we
chose. We set up a FSA-wide project on it. We produced a paper
about how we expected our new regime to operate and we shall be
spending more effort on money laundering than we did in the past,
particularly outside the banking community. The banking regulators
always did pay quite a bit of attention to money laundering but
less was done in insurance and also of course the regulation of
lawyers and accountants, which we shall be focusing on now.
9. What tests will you be applying to yourselves
to see how much progress you are making on this?
(Sir Howard Davies) There are some things you can
measure, suspicious transaction reporting is one of them, where
that is what the systems are supposed to produce. They are to
throw up suspicious transactions which are then reported to the
intelligence services, but the best test will be when we assess
the strengths of the systems and controls in individual institutions,
which we commission reporting accountants to do for us from time
to time. Up to now, we have found that when we have done that
on institutions, we have found quite a lot of problems and quite
a lot of exceptions. I should like to think that in five years'
time we would be finding far fewer bad reports when we put in
accountants to report on money laundering controls and far more
clean bills of health and at the moment we get too few of those.
10. After 1 December what will be the new money
laundering rules which will be brought in by the FSA?
(Ms Sergeant) The money laundering rules and regulations
already exist in the 1993 legislation. What we get on 1 December
is a specific objective to contribute to the reduction in the
way the financial system can be used for the purposes of financial
crime, which no previous regulator has had. Going with that we
have rule making powers so that we can make specific rules setting
very specific standards for how people should operate in terms
of their systems and controls to prevent money laundering. We
also get powers which we have certainly not had in respect of
banks and building societies before, which are to sanction publicly
and also to fine people who have been found wanting. Finally,
under the money laundering regulations we shall also get the criminal
prosecution powers which hitherto have sat elsewhere in the system.
11. Under what circumstances will you be able
to fine people or name them publicly?
(Ms Sergeant) We have a general policy towards the
way we will exercise our enforcement powers. We intend to use
it as a strategic tool. There are plenty of things we can do in
the supervisory process beforehand but if people conspicuously
do not meet the standards, then we shall publicly name them and
fine them. If it is very bad and following the Crown Prosecutors'
code we consider it is appropriate to bring a prosecution, then
in the same way as any other law enforcement authority would do,
we would bring a prosecution.
12. Is there any evidence of money laundering
arising from the 11 September attacks?
(Ms Sergeant) Nothing particular. I should say that
the financial institutions have worked very hard indeed to support
the law enforcement authorities to try to detect any suspicious
transactions which they can report in that context. There is nothing
particular arising out of that. We do not actually receive the
reports. Our job is to try to ensure that the systems and controls
the financial system has are strong enough to detect this in order
that the financial institutions we regulate can report to the
National Criminal Intelligence Service. We believe the level of
reports has certainly gone up and that some of that material is
proving to be useful.
(Sir Howard Davies) One thing we have been doing since
11 September with co-operation from the security services here,
the FBI in the States, etcetera, is giving information to institutions
about particular names of companies or individuals and then they
must search their records against those people. They have then
been making reports to the National Criminal Intelligence Service.
The number of those reports has gone up considerably, but it is
a bit difficult for us to say how significant that is because
of course it is NCIS who can piece together all that intelligence.
I believe it is proving helpful to them, but I could not point
you to any specific consequence.
13. If strong evidence came up later on in the
year of some money laundering arising from 11 September, would
you be able to apply the new powers you get on 1 December retrospectively
to cover these instances?
(Ms Sergeant) What we should be able to do is look
at the systems and controls aspects of this. If we find systems
and controls lackingand if they are seriously lacking right
now, frankly the chances of them being sorted out by 1 December
are probably not enormously high, although in some cases they
might be - then we can certainly use our fining and public censure
powers. The prosecution powers can be retrospectively applied
because they exist already. It is just that we are being given
them, whereas previously they have sat with the other criminal
14. There was some indication that after 11
September the movements on the market indicated that there might
have been some insider trading, probably from terrorists who had
known what was coming. Have you discovered any evidence of this?
(Sir Howard Davies) No. As you say, some interesting
theories were advanced as to the possible ways in which you could
have profited from a kind of macabre form of insider information
if you had thought that this attack was going to be successful.
Immediately after 11 September, we did look, and we asked our
exchanges to look, intensively at trading patterns in stocks which
might have been expected to be affected by 11 September. I am
thinking particularly of airline stocks, but also perhaps of gold
and perhaps of insurance companies, the three things you might
have most immediately expected. In fact the net was drawn a bit
more broadly than that. We have done a lot of work in collaboration
with other regulatory authorities internationally, both Europe
and North America. Although there were initially some transactions
which looked a bit odd, and some of them have been written about
in the newspapers, we have found that in each of the cases we
have investigated, there was a plausible reason for those transactions.
It was a difficult period in the market because the market was
already going down and there was also rather a wide dispersion
of views about where the market was likely to go, with some people
saying they were just engaged in a small minor market adjustment
and a modest slowdown which tended to be a broad consensus view,
but quite a number of people, notably hedge funds, were positioning
themselves against the possibility of a serious recession. There
was quite a dispersion of market expectations and in those circumstances,
it was not surprising that you saw people taking some quite aggressive
short positions in volatile stocks; and airlines are particularly
volatile stocks in recession. All of the investigations which
we have undertaken so far, we have pursued to the point at which
we are satisfied that there was a respectable market based reason
for those transactions. We sent a report on this activity to the
15. Moving to the other aspect of the 11 September
atrocities, the impact on the insurance industry, where it has
been estimated that Lloyd's probably have a net exposure of £1.3
billion, but that is a net exposure after re-insurance, are you
satisfied that the insurance industry generally, and Lloyd's in
particular is capable of absorbing the sort of shock which is
going to arise from the claims due to 11 September?
(Sir Howard Davies) I am reluctant to be seen as the
re-insurer of last resort here in giving a kind of blanket assurance
about the industry, but I would say that the cost of the World
Trade Centre disaster does seem to have been very broadly spread
across the industry. There are many re-insurance contracts, but
most of them end up in very large and well capitalised institutions.
So far the institutions concerned have disclosed the costs and
have made arrangements, as Lloyd's have done, to provide for those,
to raise cash to meet their liquidity requirements and solvency
requirements that they create. Of course this is a very large
hit and it is impossible to say that the world's insurance industry
can sail through a $30 billion, or whatever it might be, hit without
suffering some consequences. There have already been one or two
small corporate failures and it is possible that there may be
more. We watch the position as closely as we possibly can, but
at this point the estimates being put forward by the companies
and the impact on them have been digested by the market. They
are bad news, but they have not been seen to be terminal for any
major player. This is something on which we are at a very heightened
state of alert and in discussions with the industry on a real
time basis. There is no doubt that there will be a need for injections
of capital into the general insurance industry and that capital
will need to be remunerated and that remuneration is likely to
come partly in the form of higher premia. We can see the prospect
of increased insurance premia for airlines and indeed for buildings,
etcetera, and over time one hopes that will enable the industry
to rebuild its capital base to cope with this hit.
16. As you know, a committee of French MPs has
recently suggested substantial money laundering activity in Britain
and its dependencies. The suggestion seems to have had three elements:
one was in the core financial services of the City. There the
FSA have already commented that these suggestions are out of date
because of the tightening which has already taken place. The second
referred to the problems of bureaux de change where action has
been taken. The third related to Crown dependencies. To what extent
do you feel that the regulation of transactions in the Crown dependencies
is as strict as it now is in mainland Britain?
(Sir Howard Davies) Thank you for providing the answers
to two of the points in the Montebourg report, which we did think
was a slightly excitable document. As far as the dependent territories
are concerned, I ought to preface my reply by saying that we carry
no responsibility for the regulation in those dependencies. However,
what I can say is that there have been international assessments
of the regulation of offshore centres from a financial regulation
point of viewI am not talking about tax here: I am talking
about the quality of their regulation. The most recent was done
by the Financial Stability Forum, of which I am a member, which
is a grouping of the G7 finance ministries, central banks and
leading regulators. So the Fed and the SEC are in it and the IMF
and the World Bank. A working party spent a year under the head
regulator of Canada looking at quality of regulation in offshore
centres around the world. They divided them into three divisions.
Division one was those which broadly met international standards
in the onshore world and of course the onshore world has some
good and bad in it too, frankly. Division two was ones where there
were serious grounds for improvement needed. Division three was
ones where the standards of regulation were seriously deficient
by international standards. The Isle of Man, Jersey, Guernsey
were all in division one. Monaco, for example, was in division
two. I take that as an offshore centre entirely chosen at random.
For example Nauru was in division three. This was a published
assessment and what is now happening after that is that the IMF
has set up a special unit to go around each of these offshore
centres in order to do a more in-depth assessment and to confirm
what needs to be done to meet such deficiencies as there are.
All three divisions will be covered by that assessment. The Isle
of Man and Jersey have volunteered to be early in, because they
feel that they want to demonstrate what they have done and they
will be assessed at a relatively early stage. That objectiveinternational
assessmentcertainly puts them in the top division. Of course
standards are rising all the time since people have appreciated
internationally the scope for financial criminals to use centres.
It is not right to be complacent about any of these things, but
it is clear to me that the Crown dependencies are in the first
division of offshore centres.
17. That is encouraging. Just returning to my
question, would you say that their level of scrutiny was comparable
to the City of London under the FSA?
(Sir Howard Davies) On money laundering, yes it is.
18. There were widespread and surprisingly concrete
press reports that 65 per cent of capital exported by bureaux
de change comes from criminal sources. This figure seems to me
slightly astonishing and I wondered whether you had a view on
(Sir Howard Davies) I am afraid I do not have a view
on it. We do not regulate bureaux de change and the proposition
put out by the Government yesterday is that that responsibility
should be with Customs and Excise. I am afraid I could not reliably
confirm or deny that.
19. A minor point on short selling. I am not
clear what your position is on it. Following your speech which
dealt with this, there seem to be three definitions: aggressive,
unattractive aggressive and abusive. Which one are you prepared
to take action on and what kind of action?
(Sir Howard Davies) Abusive.