In a letter to Ruth Kelly, financial secretary to the Treasury, McCarthy responded to criticism from Lord Penrose that the FSA did not ‘properly explore all the possible options for the protection of new policyholders, before allowing the life assurer to put up the ‘For Sale’ signs.
He said, that while the FSA agreed that this was an area for improvement should similar situations arise in the future, ‘we still think we reached the right decision in this case’.
‘The prospective benefit to its one million existing policyholders of a sale of Equitable was bound to outweigh the prospective detriment to the 6,000 policyholders who joined after the House of Lords verdict, he added.
McCarthy also said that issues that arose out the Equitable debacle have been learnt and incorporated into the watchdog’s regulatory regime.
McCarthy pointed out that the FSA only took over regulation of Equitable Life in January 1999 and said another report, the Baird report, released in October 2001, concluded the die was already cast by this time (January 1999), supported by Penrose’s analysis.
‘In response to Baird, we said that, with the benefit of hindsight, it was clear that a number of issues could have been better handled and that we could take those lessons to heart.
‘That is what we have done, in modernising the regime that we inherited and in making the day-to-day supervision of insurance companies more proactive and risk-based.’
He also said the Parliamentary Commissioner for Administration report, published in July 2003, found no maladministration by the FSA.
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