Select Committee on Treasury Written Evidence

Supplementary memorandum from the Financial Services Authority

  This memorandum responds to the Committee's requests at the evidence session on 11 December 2007.

Karin Forseke and her membership of the FSA Board [Q 1545]

  1.  Karin Forseke was appointed as a non-executive director of the FSA on 1 December 2004, at which time she held the position of CEO at Carnegie Investment Bank AB, Stockholm. She left Carnegie in February 2006.

  2.  In May 2007, Ms Forseke reported to me that the Swedish Financial Supervisory Authority (FI) was conducting an investigation into certain matters at Carnegie. She indicated that the events under investigation overlapped, to a limited extent, with her tenure.

  3.  On 27 September 2007, FI issued a report in respect of its investigation. I read and considered carefully the full report, as did the then Deputy Chairman, Deirdre Hutton, and the present Deputy Chairman, James Crosby. I discussed its findings with the Swedish Regulation, who confirmed that there was no allegation that Ms Forseke had committee any irregularity, and confirmed that the major problems at Carnegie had developed after Ms Forseke had resigned as CEO. I held further discussions with Deirdre Hutton, James Crosby and HMT, as well as clarifying Ms Forseke's account of her time at Carnegie.

  4.  Ms Forseke brings significant international and markets experience to the FSA Board and her contribution is highly regarded by her Board colleagues, and the executive.

  5.  As a result, both I an those I consulted were unanimous in our view that it was appropriate form Ms Forseke to continue as a member of the Board of the FSA.

Rosemary Radcliffe and Northern Rock's Audit Committee

  6.  In their evidence to the Committee on 4 December, PricewaterhouseCoopers referred (in answer to Q 1353) to having "obtained explicit clearance with the regulators that [Rosermary Racliffe's] independence was not impaired". The regulator in question was not the FSA by the Securities and Exchange Commission (SEC). The SEC had raised the issue of the suitability of Rosemary Radcliffe's membership of the Northern Rock's Audit Committee.

  7.  The background is that Miss Radcliffe had been a partner of PwC and was still in receipt of a PwC pension. The SEC had confirmed that PwC were required to be independent of Northern Rock in compliance with SEC rules, on the basis that there report to be issued by PwC under Regulation AB would be on the controls and operations within the company and would be included in a public filing in the USA. The matter was subsequently resolved in discussions between PwC and the SEC, and Rosemary Radcliffe was reappointed to northern Rock's Audit Committee on 15 February 2007. In this context we would refer the Committee to the following extract from Northern Rock's 2006 Annual Report and Accounts,


    The Audit Committee comprises six independent No-Excutive directors and met five times during 2006. During 2006, membership of the committee increased to six, following the appointment of Rosemary Radcliffe to the Committee. Miss Radcliffe attended one meeting of the committee before resigning from it in light of concerns raised by PricewaterhouseCoopers LLP about the effect that her membership of the Committee may have on their independence as Reporting Accountants under SEC rules in the USA. Miss Radcliffe is a former PricewaterhouseCoopers partner. Following further detailed considerations of this matter Miss Radcliffe has been reappointed to the Committee on 15 February 2007."

The implications of nationalisation on Northern Rock's Granite structure [Q1521]

  8.  The exact impact of any nationalization on the granite and the covered bond programmes depends on the nature and form of any proposed legislation which is primarily the responsibility of HMT. The Tripartite authorities have identified a number of detailed points regarding the programmes that would need to be addressed as part of any proposed nationalisation and it is intended that HMT would ensure that all of these points are adequately covered.

October 2007

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