Supplementary memorandum from the Financial
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
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
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.