A report blaming UK regulators for the Equitable Life crisis has been approved by the European Parliament.
After a debate held in Strasbourg, France on Tuesday, members of the parliament voted in favour of the report’s analysis condemning the UK's light touch regulation policy and its deference to the life firm’s reputation.
Equitable Life had to close to new business in 2000 after it emerged it could not honour its policies, slashing the value of customers' life savings.
The report, drafted by Liberal Democrat MEP Diana Wallis, was the result of months of interviews and investigations by the Parliament’s Committee of Inquiry.
Following the vote, Wallis says: “For the victims of the Equitable Life failure, the report delivers an analysis of the UK's flawed process of implementing EU law which, combined with the imminent report of the UK Parliamentary Ombudsman, should act as a pincer movement and deliver compensation to the victims.”
On the matter of compensation for the 1.5 million policyholders affected, mainly in the UK, the report found the Financial Ombudsman Service (FOS) did not offer an appropriate means of redress. It advised that the capacity of the FOS should be improved as well as work done to reassure people it is an independent body.
Although the Committee cannot order the establishment of a compensation scheme, it can put pressure on the UK Government to set up a scheme on the grounds it failed to fully implement the EU Third Life Directive.
The committee hopes its own damning report coupled with the Parliamentary Ombudsman's report into the crisis, due at the end of the year, could lead to the establishment of a Government-funded compensation scheme for policyholders.
Wallis recommends in future, it must be made clear who is responsible for such situations when seeking redress.
She also says affordable legal process across EU borders was essential for internal markets to function properly.
It is hoped that the report will prompt the Commission to enhance future lawmaking processes and to be more pro-active in such matters.
The EU's inquiry also goes some way to contradicting the conclusions drawn in the Penrose Report into Equitable Life in 2004 which blamed the company rather then regulators for the crisis.
The final report can be found at http://www.eurpoparl.europa.eu/comparl/tempcom/equi/report_en.pdf
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