Ex-FSA chief set to face crunch questions

Former Financial Services Authority chairman, Sir Howard Davies, is to meet with a corporate governance group to explain his role on the audit committee of Morgan Stanley during the turmoil of the credit crunch.

Sir Howard, also former deputy governor of the Bank of England, is one of three Morgan Stanley directors who have agreed to meet with pressure groups demanding an explanation for the massive writedowns.

The bank has written down $10.6bn thus far, and is among those in the spotlight of corporate governance groups that are stepping up pressure for directors to account for the massive losses of the last four months, Dow Jones reported.

The two other directors are Charles Noski – former CFO of US defence technology company Northrop Grumman and US telecoms group AT&T – and former Securities and Exchange Commission Chief Accountant, Donald Nicolaisen.

The three are also standing for re-election.

CtW Investment Group, which represents nearly six million workers and owns pension assets in excess of $1.4trillion, has sent letters to the boards of six banks, demanding answers.

The group said shareholders are entitled to a detailed explanation of what audit committee members did, individually and collectively to understand Morgan Stanley's exposure to risk. This risk included its investments in exotic debit instruments. Directors should explain, CtW said, what appropriate steps management took to control the exposure.

'We have agreed to meet with CtW and take its concerns seriously,' a Morgan Stanley spokesman representing the directors said.

The bank is set to kick off AGM season with its meeting on April 8.

Further reading:

Morgan Stanley reviews risk officer position

Morgan Stanley suffers $940m sub-prime hit