Exmination of Witnesses (Questions 280-299)|
TUESDAY 13 NOVEMBER 2001
280. You have just told Mr Beard that the guaranteed
annuity policy holders do not have the benefit of the protection
of the 1986 Act.
(Sir Howard Davies) At the point of sale, certainly,
281. Abbey Hey, well. Two-thirds of these policy
holders were members of group schemes and new GAR policies were
being taken out as part of group schemes up until 1993, so what
you have just told Mr Beard is not accurate, is it?
(Sir Howard Davies) I am not sure I could answer on
the position of a new member within an individual group scheme.
I do not think that they are covered by the PIA rules within a
group scheme. I would be happy to write to the Committee on that
point but I believe that to be the case.
282. It is an important point because it would
affect the accuracy of your reply to Mr Beard.
(Sir Howard Davies) Yes, it is an important point
and we will certainly respond to it, but the assumption on which
I was replying to Mr Beard was that it was the original policy
that was covered and that joining a group scheme was not a regulated
act covered by the PIA rules. I will certainly be pleased to clarify
that to you.
283. But you would accept that new policies
were being taken out for a further five years after 1988?
(Sir Howard Davies) Within group schemes, yes.
284. We look forward to your comments on that.
We also would like you to write to us on how you interpret the
new obligation of duty to customers replacing the policyholders'
"reasonable expectation". It is not a matter that we
need to hear now but perhaps you could write to us.
(Sir Howard Davies) Yes. We published a discussion
paper on that on which we have had some responses, so we will
be very happy to write to you about that. 
285. Sir Howard, before the last evidence session
on 30 October you presented to the Committee this report on your
views of the Baird Report. In the second paragraph of that note
to us which for my colleagues is EQ14, you gave a potted summary
of your version of Baird and you cite that the report did nevertheless
conclude that by 1 January 1999 the die was cast and nothing that
the FSA could have done thereafter would have mitigated in any
material way either the outcome of the court case or the final
outcome as far as Equitable Life was concerned. That is being
a little bit economical with the truth, is it not, in terms of
what Mr Baird actually concluded?
(Sir Howard Davies) I do not believe so.
286. Where did you get that potted summary of
Mr Baird from?
(Sir Howard Davies) In 6.2.4.
287. Can you read that out to us?
(Sir Howard Davies) I know that there are three words
which I have not included but which I do not think alter the sense
within the context.
288. Which words?
(Sir Howard Davies) It says that we have seen nothing
which the FSA could have done thereafter which would have mitigated
in any material way, blah, blah.
289. There are some other words.
(Sir Howard Davies) It says that accordingly, applying
hindsight, it is fair to say
Mr Laws: No: what are the other words
that you missed out?
Chairman: Read the words.
290. Do you want me to read the words out? "It
is fair to say that by January 1999 the die was cast and we have
seen nothing which the FSA could have done thereafter which would
have mitigated in any material way the impact of the outcome of
the court case as far as existing policyholders were concerned."
(Sir Howard Davies) Yes.
291. Why did you miss that out in your summary?
(Sir Howard Davies) For no particular reason.
292. It is pretty important, is it not, as far
as the existing policyholders were concerned, not new policy holders.
(Sir Howard Davies) I do not disagree with that. That
is true, as far as the existing policyholders are concerned.
293. And what about policyholders who joined
after the FSA took over the regulation?
(Sir Howard Davies) The report addresses the question
of whether we should have closed the company to new business earlier
and concludes that there was no strong argument for doing so.
294. I am not sure it does say that. Let us
go to and look at the period when you took over the regulation
of the Equitable Life. We discussed this at the last evidence
session. This is referred to in the papers at 4.19.2 on page 96
and goes on from there. You remember we discussed a memo that
you had on taking over the regulation of Equitable Life and the
background information which said, "The information received
today about Equitable Life is unconvincing and raises serious
questions about the company's solvency", and the note that
you had before taking over the regulation of Equitable Life also
contemplated closing Equitable Life to new business, which is
quite a big step which would potentially have protected investors
who put their money into Equitable Life after that point in time.
You are probably aware that I have asked the FSA to release those
two briefing documents to the Committee and the minute of that
particular discussion that you had in taking over. I understand
that you have refused to release those documents.
(Sir Howard Davies) The Treasury has refused. They
are Treasury documents.
295. Why have they refused?
(Sir Howard Davies) Because they are covered, as I
understand it, by the Osmotherley Rules on what documents can
296. The author was an Under-Secretary; is that
(Sir Howard Davies) I believe so.
297. You would be happy yourself to release
them? The Treasury has blocked them?
(Sir Howard Davies) I have asked, because they are
Treasury papers, what the Treasury view is and I have given you
the Treasury view.
298. You accept, do you not, that having asked
about the status of these rules and asked the House of Commons
Library for their view about the status of these rules, the rules
give the Treasury an option not to release those documents. There
is no obligation not to release those documents. Do you accept
(Sir Howard Davies) Mr Laws, I am simply not going
to be drawn on this subject. These are Treasury papers. I have
transmitted a Treasury response. I think you will have to pursue
that with the Treasury.
299. But it is open to the Treasury, as I have
been told by the House of Commons Library, to release these documents
to this Committee.
(Sir Howard Davies) I am not here to dispute it.
Chairman: I think that is a matter that
we as the Committee can take up with the Treasury.
3 See p. 55.