View from City Road: Standard deals a body blow to self-regulation

Standard Life's decision to withdraw its support for the Personal Investment Authority, and add its voice to Prudential's call for statutory regulation, has once again plunged the would-be regulator into crisis. Britain's two largest life insurance companies both now oppose patching up the discredited system of investor protection by self-regulation.

Standard Life and the Pru together have about 20 per cent of the life and pensions market, the PIA's prime focus. Their refusal to join the PIA would itself be enough to damage the new body's credibility, but the potential opposition extends to other large insurers such as the BAT-owned companies, Allied Dunbar and Eagle Star, and Scottish Amicable.

The industry has fallen out with the PIA over who should sit on the board. Without a majority of industry practitioners, the PIA offers not self-regulation but some unacceptable hybrid. Rather than expose itself to control by unaccountable 'public interest directors', Standard Life would prefer a regulator answerable to Parliament.

Since the determination of the Securities and Investments Board to remove control from industry practitioners was made clear a year ago, the dispute seems strange. And the PIA also seems to interpret the public interest as allowing the appointment of retired financial services executives. Still, Standard Life's publicity-shy chief executive, Scott Bell, is clearly in deadly earnest or he would not break cover.

It is hard to see how the PIA is going to overcome its difficulties, despite the public assurances offered by the Treasury and the SIB. Anthony Nelson, the Financial Secretary, is keenly looking forward to the review of self-regulation to be carried out by the Treasury Select Committee. But the committee's report is months away and the PIA does not have that long. Mr Nelson should take a firmer hand with his own review now.