Examination of Witness (Questions 140
WEDNESDAY 25 SEPTEMBER 2002
140. Tell us one. (Sir Andrew Large)
Going back to my earlier days at the SIB, you will be familiar
with the mis-selling that there was then in the pensions arena.
141. Could I read out a comment from one of
the newspapers at the beginning of September talking about your
period of office in the Securities Investment Board "being
blighted by the emergence of the pensions mis-selling scandals".
This is a newspaper of course saying that you are said by former
colleagues to have been slow to appreciate the scale of the problem. (Sir
Andrew Large) I must say I find that a very odd comment, Chairman,
and of course I take the views of other people. It is absolutely
clear that my time in office at the SIB with the emergence of
the pension problem was a very, very major headache. We discovered
it and having discovered it, we had to ask ourselves what powers
did we have to put it right, and we then put it right, and we
did so rapidly. You may know that we obviously had to act, and
did act, within the law. We were, nonetheless, subject to certain
judicial reviews because there were those who thought that we
had gone beyond the law in trying to put it right. I do not think
that the statement that I was slow to appreciate the issue is
a fair one.
142. But it was a mess and people still see
it as a mess, so what advice do you have for individuals in the
situation? From our perspective as a Committee, we have many people
writing to us about the financial products. (Sir Andrew
Large) I understand that.
143. Split capital trusts is just one example,
but there are many issues about it and they feel that they have
not had a good deal, that the procedures are opaque and they feel
perhaps that they could be getting ripped off, so we do not see
the consumer getting a good deal and I would not like to think
that you are getting away with comments made to us that everything
is okay. (Sir Andrew Large) I do not think everything
is okay, Chairman. I was merely trying to give the answer to your
question and I was saying that I do think you also do need to
consider the choice available, et cetera.
144. What better can the financial services
do to help the consumer? (Sir Andrew Large) Well, I
think that in the arena of all kinds of financial products there
have been very significant improvements, as a matter of fact,
in transparency in particular as to exactly what the product consists
of, what it is going to cost and what charges are being taken
out at different stages in the process. One of the biggest worries,
I think, that consumers had in the pensions arena and in the life
insurance arena in the past was that they actually could not see
what was going on or it was difficult to see what was going on.
I think that has been widely recognised and it was something which,
when I was at the SIB, we recognised and we started to make changes
which have very much been followed through under the new arrangements.
Now, can I say, it is not perfect and, as such, it is bound to
be the case that there will be people who feel that they still
have not been given enough information or the right sort of information
about what they are doing, but there are other sides to it as
well. For many people these products can be quite confusing and
I think that the efforts that are being made to try to get better
understanding generally of these products is very important.
145. We will take the split capital trusts.
We had a hearing on that earlier in the year and we have had a
lot of people writing to us. I had a letter written to me from
an individual saying that they had put £7,000 into an ISA
and it is now worth, at that time, £80. Now, if you are writing
back to an individual like that, what are you going to say to
them? (Sir Andrew Large) Well, I am sure the person
concerned will have told you the circumstances under which it
happened, but clearly that is
146. The fact is that they invested £7,000
and have got £80 back. Sir Andrew, what we are looking for
here is your view because you are a non-executive member of the
FSA. (Sir Andrew Large) I understand that.
147. You must have a feel for how people feel,
so what are you going to say to them? (Sir Andrew Large)
You obviously sympathise.
148. Of course you do. (Sir Andrew Large)
And you go beyond sympathy depending on what they had been told
when they purchased it. If they understood what they were doing
and they knew they were taking risks that could give rise to that
loss, then you might sympathise, but say, "But you were aware
of what the risks were".
149. Do you know of many examples where people
are told to invest this money, the products are safe, they can
put the baby to bed at night and sleep until the next morning,
they make this investment and then they get £80 in return?
Is that happening a lot? (Sir Andrew Large) I would
absolutely hope not. I think that is a pretty extreme case.
150. But in replying to an individual like that,
you would be saying that this is unacceptable? (Sir Andrew
Large) I would certainly be saying it is unacceptable if the
individual who had made the purchase had no means of realising
that that is what could happen, yes.
151. So you will be dealing with these things
as a non-executive director of the Financial Services Agency? (Sir
Andrew Large) I certainly will indeed.
152. So an MP with individuals who feel they
did not get a good deal because that situation at the moment exists
maybe more than you think with consumers and indeed I was meeting
with a very senior person from the organisation with which you
were involved before and he said to me, "The consumers don't
get a good deal", so that is the reason I asked that question. (Sir
Andrew Large) I understand and, Chairman, I am very aware
of the fact that not all is as it should be in that field and
there are people who have been sold and probably still are sold
products that they do not fully understand the risks of and it
leads to those sorts of things happening and clearly that is not
153. The same newspaper report said that some
of your colleagues in the City were criticising you for your low
profile and apparent lack of in-depth economic expertise. How
do you answer that?
(Sir Andrew Large) Well, as to the low
profile, I am not quite sure what they meant. It did not feel
like a very low profile when I was at the SIB. Since I have been
at Barclays, when you are a non-executive deputy chairman in an
organisation, I do not think you expect to have a very high profile.
As to the economic situation, I think we have discussed it. I
am not a professional economist and I have not been an academic
theoretician in economics. I am more somebody who has observed
markets' behaviour and the impact of economic realities on the
business, indeed on the regulation world.
154. Mr Laws was asking you about the euro and
the European Central Bank and others. It is perceived that the
Governor is concerned about the one-size-fits-all interest rates
if we go into Europe. What is your view on that? (Sir Andrew
Large) Well, I guess what might be in his mind is a little
bit similar to a problem which I know concerns people also within
this country which is that you have a one-size interest rate environment
in a country where regionally there are differing performances,
et cetera. I suppose, therefore, that probably what is on his
mind there is that if you then go into an even bigger arena where
there are also other differences, it makes it more complex than
it does if you have just got one country
155. That is in your mind as well? (Sir
Andrew Large) Well, it certainly is a factor that one needs
to consider, absolutely.
156. Will it weigh heavily with you? (Sir
Andrew Large) It will weigh with all the various other factors.
I do not know whether it will weigh more heavily or not.
157. The whole point about the monetary policy
framework will be redundant if we do decide to join the euro and
the Government has set out quite reasonably a whole series of
tests, but what is the important test for you? (Sir Andrew
Large) Are you referring to the five tests?
158. Yes, what is the important test for you?
Do you have another one or which of the five is the important
one for you? (Sir Andrew Large) The five have not been
set by me. The five tests are obviously, I think everybody would
agree, all relevant. I dare say you could come up with others,
Mr Fallon: But what is yours? What is
the important one for you before we dispense with the arrangement
to which you have just joined?
159. As an interested observer, what (Sir
Andrew Large) I am not being obtuse. I am just trying to understand
what you are wanting me to say or what you are getting at.