David Prosser: Equitable Life: An object lesson in how to fail at financial regulation

This will not be the end of the campaign for justice by Equitable savers – and we should not pretend that they have had anything but a raw deal


Outlook Everyone will welcome the promises made this week by those who will run the new Financial Conduct Authority, which replaces the Financial Services Authority next year. It swears it will not repeat the mistakes made by its predecessor over the past decade and beyond.

Let us hope that proves to be the case – for as we are reminded today, the legacy of financial scandals can be enduring. The good news is that 11 years after thecollapse of Equitable Life, theGovernment is finally going to start doing the right thing by the tens of thousands of affected savers. It would be churlish to note that ministers have cut it very fine on their commitment to dispatch the first compensation cheques to victims of the Equitable scandal by the end of June – at least those cheques, going in the post today, have finally been signed.

However, this will not be the end of the campaign for justice by Equitable savers, and we should not pretend they have had anything but a raw deal – certainly collectively and, in the vastmajority of cases, individually too.

It was a surprise to many that last year's Coalition agreement explicitly recognised the repeated rulings by the Parliamentary Ombudsman that Equitable savers were let down by the regulatory system. That the agreement's commitment to compensate the losers in full was subsequently reneged upon was more predictable.

The failings in this package are numerous. Despite their long wait, savers will get their money back in dribs and drabs over the next three years, rather than upfront. Inevitably, that means yet more Equitable victims will die before having received the compensation they are owed. Then there is the fact that thousands of Equitable savers are missing out altogether on redress. The terms of the pay-out exclude policyholders who did not begin saving during a narrow period of time: that will cost at least 10,000 victims of the scandal.

Even those who are being compensated will be disappointed with the cheques they receive. To put it politely, not many people agree with the formula for calculating losses that ministers drew up.

The best we can say about today's pay-outs is that this shoddy episode is finally drawing to a close. The disastrous, long-term results of a basic failure in regulatory practice should be studied by everyone now preparing for the next era of consumer protection in the financial services industry.



Running out of time for a deal on US debt

As Christine Lagarde prepares to head off to Washington next week to take up her new job running the International Monetary Fund, she will no doubt be relieved by yesterday's victory for the Greek government in its battle to get new austerity measures through parliament. Still, as her new employer pointed out yesterday, the eurozone is not the only place where sovereign debt problems are biting. And the crunch in the country to which Ms Lagarde is moving could have even more damaging repercussions.

The IMF's fear is that the longer it takes the US Congress to agree a higher debt ceiling, the more acute the concerns about the budget will become. That might be a statement of the obvious but it does not seem to be a warning that the US has heard: the rows between the White House and Republicans over the debt ceiling and the deficit show no sign of abating. Nor will it become any easier to compromise as election day moves nearer.

In the short term, time really is pressing: the US has until early August to reach a deal on the debt ceiling or default on bond repayments, a truly horrendous prospect. Assuming that deadline is met, the next challenge is to agree a way forward on future borrowing; both Standard & Poor's and Moody's have already warned it could cut the US's credit rating unless there is consensus. That would mean a sharp rise in interest rates and a collapse in the value of Treasury bonds, which sit at the centre of so much in the world's capital markets.

One other comment from the IMF yesterday ought to raise eyebrows. While it wants to see the US get its deficit under control over time, it wondered out loud whether the President's proposals for greater austerity this year went too far given the weakness of the recovery. That's revolutionary stuff for an institution hardwired with hostility towards debt.



Zynga is not the bubble you might assume

Another day, another story from dot.com boom 2.0: the flotation of Zynga, the online social gaming company. The usual ingredients are there: the enigmatic founder, Mark Pincus, the relative youth of the business (it's four years old) and the stratospheric valuation – can it really be worth up to $20bn (£12.5bn)?

Just one thing: Zynga isn't a dot.com, at least not in the sense we mean when talking about the social networking phenomenon. It sells something real and tangible – games you can play, even if the internet is the medium (or one of them) through which you do so. And it sells an awful lot: revenues will be close to $2bn this year, generating profits exceeding $600m.

Zynga's phenomenal growth has come courtesy of Facebook's success, but should Facebook turn out to be a fad, as some people still think it will, that wouldn't necessarily spell the end of Zynga. It may be over-dependent on the social network right now, but in the end it will stand or fall on the quality of the gaming experience it offers, just as conventional video game manufacturers have tocontinually come up with new and better products.

That's not to say Zynga is worth the money – just that it has more of a product than the social networking businesses at the heart of dot.com mania. And at the moment, it is doing a good job at shifting that product.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

Reach Volunteering: Trustees with Finance, Fundraising and IT skills

Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent