Wednesday, 19 September 2007

How to panic the Treasury

It is no surprise that any decision involving three parties in likely to be a dog's breakfast. And so it is in the case of Northern Rock where the triumvirate is the Treasury, the Bank of England and the Financial Services Authority.

My experience of dealing with the Treasury is that they can only be panicked into action if their preferred modus operandi of doing nothing is going to result in ignominy or ridicule.

Just after 9/11, when it was clear that the insurance market for aviation risks was going to be withdrawn at the end of seven days, the way we (AIRMIC) got the Treasury to come to the party was by leaking a letter to Brown from concerned airlines to the Financial Times who obliged by running it as their lead story on the Thursday. By the Friday evening Brown had announced that the Treasury would act as insurer of last resort, this gave the rest of the world the weekend to figure out what they were going to do before the Monday deadline for removal of coverage.

When the Insurance Mediation Directive from the EU was passed into law by the Treasury they did not devote enough legal resource to defining who they were anticipating the directive to cover, which meant that after they and the FSA had had a go, it turned out that risk managers who purchased insurance on behalf of their subsidiary companies would be considered intermediaries. When asked whether there was any public interest at stake or whether they had intended to regulate risk managers the answer from both bodies was "no". The only way out they advised was to provide a legal opinion as to why risk managers should not be regulated. After considerable expense it was only when AIRMIC got an opinion from counsel which castigated Treasury for their shoddy work of drafting the EU regulations into UK law that suddenly the FSA found an answer and saved everyone a lot of effort.

When I asked the Cabinet Office for a refund of the legal fees they declined.

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