Prudential rejects regulation by PIA

Prudential Corporation, the strongest critic of the Personal Investment Authority, has finally rejected the new regulator and aims to seek direct supervision by the Securities and Investments Board, the senior financial watchdog.

The Treasury, the SIB and the PIA itself all described the Pru's move as regrettable. The Treasury said neither the PIA nor its timetable would be deflected by the Pru's decision.

Although the PIA has little enthusiastic support in the financial services industry, most critics seem set to join, albeit reluctantly. Scottish Amicable is the latest life insurer to apply despite misgivings about the composition of the PIA's board, which it believes represents a fundamental break with the concept of self-regulation that is required by law. Standard Life is expected to follow.

A key decision will be that of the Halifax Building Society, which has serious reservations about the PIA and doubts its ability to deliver higher standards. Some believe a rejection by Halifax could deal a critical blow to the PIA's credibility.

Mick Newmarch, Prudential's chief executive, said it did not believe the PIA could offer adequate and cost-effective saver protection.