Select Committee on Treasury Minutes of Evidence

Exmination of Witnesses (Questions 280-299)



Mr Cousins

  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, no.

  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. [3]

  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.

Mr Laws

  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 be released.


  296. The author was an Under-Secretary; is that correct?
  (Sir Howard Davies) I believe so.

Mr Laws

  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 that?
  (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.


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