Financial Services Inquiry
Item 6 is the banking and financial services inquiry. I apologise to Mr Nish for the delay in reaching the item. I am aware that he must leave by 12 noon, so I ask members to ask particularly focused questions, to allow us to get through as much as we can.
We will hear evidence today from parts of the financial services industry in Scotland other than the banking sector. I am pleased to welcome David Nish, who is Standard Life's newly appointed group chief executive. I ask him to give a brief introduction, after which we will ask questions.
David Nish (Standard Life):
Thank you for the opportunity to speak to the committee. I value the time.
Standard Life has a long association with Scotland—we have worked in the country since 1825. Standard Life is one of the country's foremost financial services companies and foremost employers.
I will focus on four topics: a reflection on how Standard Life performed during the crisis and particularly on the resilience that we ended up displaying; our drive to put customers truly at the heart of everything that we do—we are very much a customer-orientated business; our needs as a business for talent and high-quality infrastructure; and the importance of getting regulatory reform right.
Before going into that, I will comment on Standard Life as a business—our areas of activity and geographical reach. Our business was founded in Edinburgh in 1825, as I said. Today, we provide pensions, life assurance, investment management and health care insurance to just over 6.5 million customers worldwide. We have some £140 billion of assets under management. We have about 10,000 employees throughout the UK, North America, Europe, India and China. Scotland remains the heart of the business. We employ just over 6,000 of our staff in Scotland and the vast majority are in Edinburgh.
After 80 years as a mutual company, the Standard Life Assurance Company demutualised in 2006 and Standard Life plc was born and was listed on the stock exchange. We now have 1.5 million individual shareholders in 50 countries. A unique point of our structure is that we have retained a large proportion of our policyholders as shareholders.
I move on to my four topics. I am—obviously—pleased to say that Standard Life has weathered the crisis well. I attribute that to the disciplined approach that we took to financial and risk management. That enabled us to drive a strong capital base, and it positions us well for the economic recovery that it is hoped will come through.
Having said that, I must acknowledge that we had a crisis in 2003. The strategic review that was started in 2004 played a large part in our significantly bolstering our capital and risk management. As a result of that review, we changed our business model fundamentally. We refer to a capital-light approach and try to remove unrewarded risk in the business that we undertake.
A further example of that is the decision that we took late in 2009 to dispose of our banking business, which reflected our view that the investment level that would be needed to keep up the intensification of competition in the UK mortgage market was not ultimately compatible with the focus on being a long-term savings and investment business. [Interruption.] We are well placed for future growth in those areas, and our focus is now very much on delivering secure retirements for our customers, which fulfils a key and growing social need, as the committee will appreciate.
How do we put customers at the heart of everything that we do? For me, that means creating an organisation that has a deep appreciation of customer attitudes and needs at every level and is obsessive about ensuring that the customer's voice resonates throughout the business. We must ensure that we are easy and simple to deal with, because financial services products are not noted for their transparency. We must also ensure that all employees understand and embrace those principles. We see ourselves as a people business that deals with customers who are individuals and with their individual needs. That is all rooted in understanding that long-term commercial success flows directly from delivering superior value and service to our customers. We talk about it as a truly beneficial relationship with our customers.
Being a customer-centric business is about more than being pleasant and engaging; it is an organisational philosophy and a value system, not just a set of activities. I will consider one of the issues that we had last year to highlight how we react. Last year, we let down some of our customers in our pension sterling fund. That was down to something to do with our literature, which was found to be wanting. It is important that, when mistakes occur, we recognise our responsibility, are open about our mistakes, put things right and improve our processes. We did that by ensuring that the affected customers were properly recompensed and setting in train internal changes to improve how we describe our products to customers. We also worked openly with our regulators as soon as we identified the problem, and we understood the consequences of the failure as a result. An ability to work transparently with customers and regulators must be at the heart of being a customer-centric business.
Our future success as a business requires quality infrastructure and a strong supply of talent. Standard Life is an international business. We have deep local roots but need to have international reach, so transportation links within Scotland and to the main financial centres around the globe are important to us. However, the pool of talent is much more important. The universities sector has a key contribution to make to that, as we have a significant graduate intake, but we also need to invest in the development of our existing talent. Consequently, talent management is an important element of my agenda. We also have a responsibility to highlight the positive contribution that the long-term savings sector makes to society so that talented individuals are encouraged into financial services—the sector is often viewed as an unattractive area in which to work.
I emphasise the importance of getting regulatory reform right. The financial crisis has revealed deep shortcomings in regulation, and the authorities are right to strengthen regulation comprehensively. However, we need to avoid a one-size-fits-all approach that weighs heavily on all financial services. [Interruption.] We need to be smart and pragmatic in redesigning regulation, which requires a strong and well-informed dialogue between firms and policyholders. I will ensure that Standard Life continues to make a strong contribution to that dialogue.
Those are my opening comments.
Thank you, David.
I remind all members of the public and everyone round the table to ensure that they switch off their mobile phones.
I declare an interest in that I have an endowment policy with Standard Life, as a result of which I am also a very small shareholder in the company.
The focus of the financial crisis has been the banking sector. Two of the major banks that suffered were Scotland-based banks: the Royal Bank of Scotland and HBOS. Has that had any impact on Scotland's reputation as a financial services centre?
I will try to stand back from the emotional reaction to the crisis and think substantively about what the financial services industry in Scotland is. The emotive term "Scottish banks" can make it seem as if there is a strong attachment to the industry, and we need to be careful about being drawn into that.
In financial services in Scotland, we are exceedingly strong in insurance and investment management. Then there are areas such as pension provision, fund management support and stockbroking—the whole back-office sector. Those sectors have managed to weather the crisis relatively well. In the insurance sector, which takes us back to my particular business, it is obvious that we were affected. Our customers were affected and, more importantly, our counterparties were affected—we were companies that traded with the banking sector and we were also investors in it. However, we should not let ourselves be drawn into thinking that "the banks" means the same as Scottish financial services.
Financial services go beyond that. For example, we have good, strong companies in the insurance and investment management space, and there has been the potential to grow our business over the past couple of years. My investment company, Standard Life Investments, has grown, and the largest amount of new inflows of assets has been in the past 12 months. We now have third-party moneys as nearly 40 per cent of our business. That number started as zero, in effect, 10 years ago.
It all comes down to the quality of the propositions and the service that we offer. More importantly, it is about the people we have and retain. My worry about the impact on Scotland arises if an association is made with the ability to draw talent into what is a wider sector than just the banks.
Are there any actions that the Scottish Government or its agencies, or indeed the Scottish Parliament, should be taking to assist in developing the financial sector?
The situation in the past 12 to 18 months has been one of the most complex that most people have had to deal with—I am thinking as both a participant and an observer—and the consequences have been catastrophic in some areas. The agenda is complex, with a complex set of players involved. There must therefore be clear and open dialogue on the issues so that we understand the lessons to be learned. It is also a matter of defining what the Scottish financial services space is, so that the committee's proposals, for example, relate to it. The inquiry could become too focused, or solely focused, on a banking analysis whereas, ultimately, what we are talking about is the provision of services to customers in the form of savings and loans and how the infrastructure behind that can best be supported.
The core of the matter is that we are in a people business. That applies at the front end, at the customer interface, but also at the back end, in shops where there are highly intelligent people with heavily quantitative skills working out the various propositions. There needs to be encouragement for the skills, techniques and talents that our businesses need.
We must ensure that our environment remains competitive. The whole financial services sector cannot be boiled down to an individual country. We are dealing with the free flow of capital. We have to ensure that regulation, in particular, achieves the right balance on the European and global scenes. The products that we manufacture mostly have the word "global" appearing in them—a global equity fund or a global bond fund, for example. Individual investors are looking for diversification. That is the case through a large proportion of segments, not just at a high-net-worth level. We therefore need to be able to invest overseas and to be seen as credible investors there.
You have emphasised the strong roots of Standard Life, with its large number of workers. Has the attitude towards being a Scottish company changed since demutualisation? Do you share the commitment that Sir Sandy Crombie made to remaining headquartered in Scotland?
Very much. Any decision to change any of that deep-rooted Scottish base would have to be based on an overwhelming case. It would have to be either driven by a strategic change in the group or based on certain competitive circumstances that do not exist today. We are a Scotland-based company. We are proud of that and of what it gives us, especially the talent of our people and the skills that we are able to build. It still plays well when our business travels, as we have deep-rooted associations. Last year, our Canadian business celebrated 175 years of operating in Canada. We found that only the Hudson's Bay Company is an older surviving organisation that is in the same form today. Last year, we directed many of our activities towards celebrating that and saying that we are proud both of where we come from and of being a Canada-based company.
How do we translate where we come from into a competitive advantage? The competitive advantage comes from our people. We must ensure that, when we travel, we get right the balance between being local and being international. Members must appreciate that we deal with individual customers in other countries, who have a competitive choice to make, as local companies are also present there. There is a balance to be struck, but what we do is still founded on the quality of our people, which is built on the quality of education that they receive and so on.
Looking to the future of the Scottish base for financial enterprises of all sorts, I note that at one point you mentioned that it is important that we do not take a one-size-fits-all approach to regulation. There are several ways of looking at the matter. Are there any specific issues of concern of which we should be aware? Could Scottish companies be faced with a one-size-fits-all straitjacket?
One of the most significant issues that we and the sector are working through at the moment is the concept of solvency II, which comes from European regulation and of which members may be aware. Fundamentally, it looks at how risk and capital in companies such as Standard Life are effectively managed. We have no difficulty with the intent of the legislation that is coming forward—we support it. However, there tends to be a reaction to crisis events—a pendulum swing. It appears that, in the regulation and consultation papers that are being developed, an extreme view is being taken on the amount of capital that is required and, therefore, the cost of doing business. A lot of lobbying is taking place from within the industry—Maggie Craig may touch on that when she gives evidence—but getting to a balanced position will be a pretty hard road, as there will naturally be an adverse swing in how people view the issue.
The impact of solvency II on Standard Life, as both an insurance business and a broader long-term savings business, could be disproportionate to the risks that we are taking, especially if you look at what we have done in the past two to three years. Statistics for the maintenance of our capital indicate that it did not change much during the crisis, because of the steps that we had taken to de-risk our business and to manage our exposures, but we will end up being penalised with the rest of the sector.
Another developing theme is the suggestion that what fits for the banks fits for the rest of the financial services sector, but the two face a quite different set of circumstances. Because of the scale at which the issue is being tackled—at European level—by the time that it percolates down to a large but relatively smaller player in the sector, it ends up having a disproportionate effect and could affect how we make strategic decisions.
Are there particular points that the Scottish Government and the committee should be making about the process, in relation to a relatively large business that happens to operate in a sub-nation and might be comparable to businesses in other parts of Europe that require the same sort of differentiation rather than one-size-fits-all regulation?
First, there is a need to strengthen regulation—I very much acknowledge that. Secondly, we need to be clear that different industries and industry models require to be treated relative to the risks that they bear. There must also be sensible implementation. The danger arises when people have a cliff-edge reaction and say, "Double everything!" We cannot double everything overnight. Markets do not have the capacity to do that.
It is about encouraging a balanced reaction, in which the needs of particular industries are acknowledged and regulators end up working more closely with the businesses, so that they understand them more intimately and can regulate more effectively, as opposed to what happens when there is regulation from a distance, which tends to be rules based—rules and formulae never take account of individual circumstances.
There are some specifics. For example, there is the liquidity premium—members might not want me to go into that topic—which has become a kind of tabloid news item, at least in the financial services arena. It is very much about how the measurement of risk is undertaken. The industry bodies and the Financial Services Authority are lobbying hard on our behalf in that regard. Further emphasis on the points in our written evidence might be needed.
I am conscious of the time; I will let other members have a go.
It is refreshing to hear evidence that is more positive than the evidence that we have heard from one or two of our other witnesses. I want to ask David Nish one or two questions about solvency II. Your additional written evidence was helpful. You said:
"Important decisions on the detailed implementation of Solvency II will be taken by the European Commission in the first half of 2010."
The issue is therefore time critical. Further to Rob Gibson's question, is there anything specific, purely in relation to solvency II, that you would like the committee and/or the Scottish Government to do now?
In essence, I refer you to the items in the written evidence. The whole issue to do with liquidity premium is a technical subject. Because measurement is difficult, the natural thing to do is to go for a simplistic approach and say, "Make it bigger"—in terms of the consequences. Pressure is being applied, but reinforcement would be helpful. I would be very happy for my team to work with the committee on how to phrase that, if that would help.
Are you currently getting enough help from the FSA and the Treasury in relation to lobbying on the issue?
I appreciate the difficulties that those bodies have, which are a result of the breadth and depth of the regulation. For example, we are dealing with several hundred consultation papers, because a generic set of regulations is being cascaded down. Work with groups such as the Association of British Insurers, in its role of industry forum, has been important in consolidating and filtering individual company views to help the FSA and the Treasury to take forward the bigger points rather than issues that just end up favouring individual companies. We have worked quite successfully to do that.
In some areas, the tide is beginning to turn. We had to work quite hard to get some of the European countries and corporates to understand that solvency II would impact on them in the way that we were highlighting. If you read some of the commentary about that from the beginning of 2009, you would think that it was a UK problem only, but that was largely to do with how the situation was presented. We worked through the ABI, the FSA and the Government to ensure that it was perceived as a European issue, and progress is being made.
Do you see any individuals, groups or countries as the key obstacles to changing solvency II?
Although there is a drive towards harmony in how capital markets work, we have to recognise that each country starts with a different economic base. It is not so much that I see any countries as obstacles; it is more that they are interested in a different application of solvency II. Bodies such as the ABI and the FSA have been trying to ensure that items do not become overly negative for particular countries. As I said, there was concern in the industry last year that the situation was being painted as a UK problem, particularly in the life insurance sector, but we have managed to balance that now. For example, France has specific issues that Germany does not. There is now greater recognition that a balanced outcome is required, rather than some of the theoretical work that was put in place.
Before I let Wendy Alexander in, I remind members that we have only about 10 minutes left, so questions will have to be brief.
I am mindful of time constraints. I invite David Nish's views on a different issue: corporate governance and the Walker review. What are your thoughts on the review's impact on Standard Life's governance, but perhaps more particularly on your increasing role as an institutional investor?
As I said earlier, there has to be consequence and change following the past couple of years. I reflect back on some of the experiences that I had in other industries and sectors—I went through the Californian power crisis and the telecoms crisis and there was reaction to both.
Walker deals with risk governance, which is probably the most fundamental area. That has always been in our background. During my days at Scottish Power, we pushed risk to the top of the agenda. If you do not understand risk, you do not understand reward. It is easy to work out that you think you will make a profit, but what will be the ultimate costs associated with that? The emphasis on forming a new risk committee, as distinct from an audit committee, to allow a more professional approach to be taken to many aspects of running a business—not just in the financial services industry but more broadly—is important and we are taking that on board. Although we believe that we were making progress, having such a committee will give us more impetus.
It is important that the risk agenda picks up on the appetite for risk, which boards often have difficulty dealing with. It is easy to think of all the positive aspects of business decisions, but it is difficult to challenge yourself to think of the negative aspects—the cost of failure and the willingness to fail. One thing that we should not do with governance is drive out the willingness to take risk, because without risk there is no reward. However, you have to have a clear understanding of the risk that you run and you need the capacity in your business to absorb it. That means either that you have available the capital liquidity to use or you have the action plans in place—the mitigants—either through hedging or through having the resources to be able to do it. From that point of view, the Walker report is important to overall governance, which is the area in which I would like to see most improvement in corporate Britain.
As an institutional investor, we have an opportunity to exert influence through direct discussions with senior executives. I think that institutional investors will have a bigger hand in questioning in this area and trying to understand. Obviously, as an institutional investor, we rely in the main on externally available information; we get only a limited amount of information from one-to-one discussions with executive directors. I should not overstate that as a source that is better than published information at letting us know what is going on.
The issue is then about how to interpret information and whether what companies report really gives a clear insight into both the risks that they are running and their exposure to risk, including the speed at which that exposure could crystallise. Executives often have difficulty in accepting not only the fact that bad things happen but the speed at which they can happen. We need only think back to the dark days when Lehman Brothers went under; people had only minutes to decide what to do. Prior to the collapse, we had been very proactive in removing a lot of our exposure to the banking sector, and Lehman Brothers in particular, as a result of which we had no real financial loss. The fundamental point is being willing not only to believe that something bad will happen but to act quickly. It is a people thing.
I am mindful of time and will not pursue the matter further.
When the chairman of the Treasury Select Committee came before the committee last week, he described institutional investors as "supine and ineffective". Clearly, the challenge in risk management is to think through the respective responsibilities of senior management, boards, regulators and institutional investors. It would be helpful to have Standard Life's view in writing on that whole terrain. That would help our further consideration of the matter.
I will take that on. It is important.
Thank you.
The building societies and others have told us their concerns about the financial services compensation scheme. They said that it does not operate on a fair basis and that societies are penalised for good management. Do you have a view on that from Standard Life's perspective?
I will get a more detailed view to the committee. The key question is whether the scheme was set up with this scale of crisis in mind. We all have to deal with that question, including at the individual level. Structures were put in place to deal with a small-scale event, but multiple companies and large numbers of customers got into distress. How can we work our way out of that? I will reflect on the matter and give a more detailed response in writing to the committee.
That would be helpful.
I have a point of clarification on the concern that Standard Life raises in its submission about insurers being forced to hold assets that are realisable today to meet future losses. How does that affect individuals who have an asbestos-related condition? I am thinking of the Court of Session's decision last week.
I would need to take that one away and come back with a specific answer. We are not that type of insurer in terms of the risks that we end up covering. I may be able to help the committee on where to direct the question to get a written response. The Association of British Insurers covers a broader insurance base, so Maggie Craig may be able to help the committee on the issue.
There may be questions that we do not get to because of time constraints, which are entirely our fault, so perhaps we could write to you with them and get your response in writing.
Yes.
In earlier evidence from people who seek investment to expand Scottish industry, we heard about big projects in renewable energy and so on and about the more sophisticated use of financial products such as mortgages to upgrade the thermal efficiency of houses, about which we have been very remiss. In what way can an organisation such as yours relate positively to industrial innovation? For instance, how did your company's circumspect attitude differ from the more speculative attitude of, let us say, the Royal Bank of Scotland?
I will answer your last question first and work backwards. In many ways we are a fundamentally different type of investing business, because, in the main, when an individual's cash comes to us we are investing in an individual fund or set of funds, often directed by a third-party adviser. In many ways, we are much more into the background management of the moneys, although we give advice in some areas of our business. From that point of view, our investing activities are much more aligned to an individual's objectives than to some of the activities that a large-scale commercial bank would get into.
In respect of particular project investment, we tend to invest in investors who invest in projects. For example, we have a reasonably large-scale private equity business, which invests in private equity funders. We see that area of investment management as attractive to consumers buying long-term investment products because it gives good returns over a long period of time. It is therefore an area that we support and put a lot of activity towards, but we tend to be the secondary investor rather than the primary investor.
I will ask brief questions on two issues—perhaps you could follow them up in writing. First, what impact has the financial crisis had on customer behaviour? Have you seen any significant changes? Secondly, is Standard Life considering restructuring or making job cuts, particularly in Scotland?
There is no doubt that, during the early part of last year, and probably the last quarter of 2008, customers became very scared and worried about investing activity. They were therefore always trying to seek the lowest-risk asset classes. As you would expect—obviously, the fact that markets in effect fell through reflects a shortage of money going into markets—customers were more interested in cash-related products. They were deferring making investments in pension schemes and so on and were tending to hold on to funds. Over the past six months, that has begun to turn. Consumers tend to lag behind what is happening in the underlying economy; it tends to be the case that they pick up later in the cycle. Over the past three to six months, flows of moneys coming from consumers and mutual funds have picked up.
Last year, there were quite large-scale changes to pensions in respect of tax deductions for contributions, which undoubtedly created a lot of confusion in the minds of consumers, because it became exceedingly complex to work out at what level to invest. In many ways, the pension promise had been tax deduction in, taxable income out, but the changes last year began fundamentally to undermine that pension contract with individuals, and that, too, stopped people investing. We are now beginning to see investment pick up. We had a lot of good activity coming through in the last quarter of 2009. In our quarterly conference call, I said that we were encouraged but cautious. The caution comes from the economic environment, as we will still experience individual shocks. There are obviously concerns about, for example, the sovereign debt rating of the UK. A lot of that will be deferred until after the election, when people understand what financial package the next Government will bring forward.
You asked about restructuring. I am looking to a growth agenda for Standard Life. One of the advantages of having an internal successor is continuity of strategy, and I have been closely associated with the build of strategy over the past two to three years. We will continue to transform ourselves because the world is becoming much more competitive. We hope to do that by growing the scale and breadth of our business while deploying much more efficient technology and platforms.
Although we talk about Standard Life being an investment business and a life business, we are a customer business and a technology business at our heart. It is all about providing the best service and best proposition to our customers and deploying that by using thoughtful and wide-ranging technology. Therefore, we have a heavy investment programme this year—probably the biggest in the company's past five to 10 years. That has been kicked off and we are recruiting at the moment to invest within it.
I look forward to a bright future for Standard Life; there is a lot that we can do to grow our business effectively.
We have already overrun your time, but I will ask another question. Is that growth likely to be organic through growing your existing business or are you considering options for takeovers and acquisitions?
It will primarily be driven by organic growth, but we will use inorganic to accelerate organic growth. For example, we bought a highly successful small Scottish company, Vebnet, at the tail end of 2008. It is the market leader in flexible benefits, not only in the United Kingdom. It is a small company—it cost us about £25 million—but it has global brand names in its client list and it is a very exciting opportunity. That is a skills set and proposition that we did not have, but we acquired it.
Our strategy is organic and is driven by the customers. If we need to fill in an asset class, skill, talent or operation, we would consider acquiring it, but it would be nothing that I would paint as large scale.
Are you expanding your international growth as well? We may ask you back for a future inquiry on that question.
We have some interesting opportunities, particularly in India and China. I am flying out to China next week, and we are working with the Bank of China on a potential, very large-scale, domestic insurance joint venture. In India, the scale of the businesses is quite mind blowing. We employ something like 200,000 agents there and have a plan that says that we will employ millions of people over the next five to 10 years. It is an area of business that is growing rapidly and we have staff seconded out there. We want to give our staff international experience because that is the way to bring knowledge back and ensure that our sector stays at the leading edge. That is vital. We take talent development very seriously.
Thank you very much for your time.
I apologise that I have to cut and run.
We apologise for overrunning on earlier business. If there are other questions that we have not reached, we will write to you on them. Please also let the committee know how it can assist in relation to the solvency II issues. We would be happy to try to help on that.
Meeting suspended.
On resuming—
We resume the meeting with our final witness for today: I am pleased to welcome Maggie Craig, who is the acting director general of the Association of British Insurers, to talk about the insurance sector, which is an important part of the Scottish financial sector.
I apologise for keeping you waiting for so long; we have had an interesting morning and I am sure that we have another interesting session ahead of us. I ask you to give us some opening remarks.
Maggie Craig (Association of British Insurers):
Thank you, convener and committee members, for the opportunity to appear in front of you.
Standard Life is a big member of the ABI and I endorse everything that David Nish said. He gave a context from his business; I hope that I will be able to give you a wider context for the industry as a whole. I will touch on three themes: first, I will give a flavour of the industry's reputation and what it is about; secondly, I will touch on a theme that David Nish introduced, which is that insurance is not banking—the differences in the business model between insurance and banking; last, I will talk a little bit about the wider financial services sector in the UK and in Scotland. I am happy to expand on any of those themes as we go through.
It would be stupid to deny that the global reputation of financial services—particularly the reputation of the banks—has suffered severely, but the surveys and other work that we have done with our members, many of whom operate globally, provide no evidence to suggest that Scotland's reputation has been disproportionately damaged. That may be small comfort, but it is a point worth making.
David Nish introduced the point, which I support, that the financial services industry in the UK and Scotland is far bigger than the banks. About a third of financial services jobs in the UK are in the wider insurance industry, so it is not just about banking. Insurance covers a number of areas, such as corporate customers, individual customers, general insurance, life insurance, protection, pensions, savings and asset management. It is a broad and deep industry.
The Scottish insurance industry functions in several ways. A number of ABI members are headquartered in Scotland: Standard Life is a big example of that, Aegon's UK business is headquartered in Scotland and Scottish Widows is headquartered here. Also, a number of ABI members that are headquartered elsewhere are significant employers in Scotland. For example, Aviva is increasingly employing in Scotland and Royal London is headquartered in England but has Scotland-based businesses, such as Scottish Life. Moreover, many insurers throughout the UK have a great many Scottish customers no matter where the insurer is headquartered. That is a matrix way of looking at the industry.
I examined three types of common-or-garden policy to try to give you an idea of how ordinary people are touched by the insurance industry, although I am afraid that I was unable to get Scottish figures. In 2008, there were 26 million motor policies, 20 million household contents policies and 28 million pension policies. Through those three product lines alone, the industry touched something like three quarters of households in the UK. That is not a fantastically analytical statistic, but it gives you a flavour of the industry's reach.
My next theme, which is that insurance is not banking, is slightly more technical. I am not a banking technician, but I will do my best. There are important differences between the sectors. David Nish touched on the point, which all our members would endorse absolutely, that when we move forward to the new regulatory system—whatever it looks like—the differences between insurance and banking must be properly taken into account. Solvency II is a good example of that.
Banks are essentially in the business of borrowing short to lend long. Apparently, the technical term for that is maturity transformation. Insurers are in a different business; they are about managing assets and liabilities, so the insurance industry does not start with such a duration mismatch, as we might call it. That is a fundamental difference and one reason why insurers are much less likely to suffer from the sort of liquidity problems that brought down the likes of Northern Rock. Insurers do not do the casino banking that the banks do; they do not undertake trading operations in the same way and their business is much less liquid. For example, people cannot take money out of their pensions before age 50 or 55, so we will not get a run on an insurer that has a lot of pensions business on its books in the way that we would get a run on a bank. Those are technical differences that perhaps do not sound exciting but, if we are examining the business model, matter a great deal.
David Nish alluded to the changes at Standard Life in 2003-04. It underwent a specific change, but there was a period between 2001 and 2004 in which the insurance industry came under extreme strain. The prudential regulation was reformed at that time and the individual capital adequacy regime was introduced. Many of our members would reference that as one of the reasons why the insurance industry has weathered the storm rather better than the banks.
Another difference that is perhaps of particular interest to Scotland is that Scottish banks built up their business within Scottish borders and did not go international until the 1990s, whereas the Scottish insurers have been writing business outside Scotland for much longer. I did not know about the Hudson's Bay Company, but I found that fascinating. Standard Life is not alone in that, because Scottish insurers have been writing business for getting on for 200 years. That difference in approach means that it has built up the people, expertise, memory and experience within the company.
The last theme on which I will touch is the fact that there is a good story to tell about the wider financial services sector. Scotland in particular has a good story.
The UK insurance industry is the largest in Europe and third largest in the world. I have already talked about many of our members having a significant presence in Scotland. We reckon that somewhere between 20,000 and 25,000 people are employed in the insurance and financial services industry in Scotland; it is a significant employer. We reckon that another 3,000 or so are employed in investment management. About £580 billion is under management. That represents pensions and savings for many people in Scotland and throughout the UK. The figures are rather difficult to get hold of, but I have some company-specific figures, if the committee is interested.
It is interesting that Scotland contains particular hubs. Edinburgh has long been a hub for life insurance, and Glasgow is increasingly becoming one as well. The Perth area is increasingly seen as a hub for general insurance. I am happy to talk about that later. Aviva has been grateful for the work that local government and the Scottish Government have done to help it build up that business. Looking forward, which we should be doing, we know that, come 2012, all employers will be required to provide pension schemes for their employees. Edinburgh is one of the biggest centres of pensions technical expertise in the country.
David Nish's phrase "encouraged but cautious" is excellent and probably describes where most of the industry is sitting at the moment. We spent a lot of time over the summer trying to tell anybody who would listen that insurance is not banking and that there is a lot more to financial services in the UK and in Scotland.
David Nish touched on another thing that we find increasingly relevant: the importance of the talent pool in Scotland. Every member to whom I speak mentions that if they employ people in Scotland or want to do so. They also talk about the quality of life in Scotland and the fact that people want to live here. Perhaps I may be permitted to make a personal comment. When I joined ABI three years ago, I deliberately stayed in Scotland because I wanted to continue to live here. Although I work in London an awful lot of the time, I still live here and I think it is a great place to work.
Those are my opening remarks. I am happy to take any questions.
Thank you for that comprehensive introduction. How many insurance companies are headquartered in Scotland and how many jobs are there in the insurance sector here? Will you also say a little about the types of services that your members provide?
The insurance arm of Scottish Widows is headquartered in Scotland. We reckon that it employs about 3,000 people here. Although its insurance arm is headquartered in Scotland, much of its general insurance business is done down south—much of it is done out of Wales. Nevertheless, a lot of its life and pensions business is done out of Scotland.
David Nish talked about Standard Life. Aviva has about 1,600 people in Perth and about 900 in Bishopbriggs, predominantly in its general insurance arm. The UK headquarters of Aegon is out at the Gyle, where it employs just under 5,000 people in life insurance, pensions and asset management. Although Royal London is a London-based brand, funnily enough it has a lot of Edinburgh-based employees. It has about 1,200 at Scottish Life and Bright Grey. The Royal Bank of Scotland has about 1,700 or 1,800 employees in Scotland.
The picture is mixed. It is difficult to slice and dice it and get precise figures. There are a number of smaller institutions as well. Does that give you a flavour?
Thank you. That is helpful.
We have talked about some aspects of the insurance industry, including asset management, but we have not yet had a full look at the role and strength of asset management in Scotland. Are you prepared to say a bit about that now, based on your business experience?
I can certainly say a bit about it. A number of areas are quite technical, so if there are any on which you want additional evidence I will be happy to supply it.
A glance at asset management shows that there are two types of asset manager in Scotland: we have the asset management arms of the big insurance companies—Scottish Widows, Standard Life, Aegon and the like—and there are pure asset managers such as Aberdeen Asset Management and Baillie Gifford. They all have a significant presence in Scotland. They work with ABI to some extent. They have their own trade body, the Investment Management Association, and they do some of their work through that, but there is a complicated interplay in the sense that a lot of asset management firms form the underlying investment for the retail products that the insurance industry sells. For example, if I bought a personal pension from Scottish Widows, it would commonly give me access not only to Scottish Widows funds but to funds run by Gartmore, Aberdeen Asset Management or whatever.
That is something for us to pursue in due course. We talked about the European regulation issue earlier. David Nish offered us opportunities to contribute things to support our industry. What is your take on the current state of the discussions in Europe?
I will start with solvency II, although I would like to bring another area to the committee's attention, too.
David Nish's comments about where solvency II is going are echoed by all my members. The concerns are around the level of capital, the detail and the calibration of how the capital might be worked out. We should remember that that is not just a technical point. For example, if an insurance business that requires capital is selling annuities and is required to hold more capital to back the annuities, that will affect the amount of annuity that any individual person will be able to buy when they come to retirement with their pension fund. We need to understand that solvency II is not an abstruse technical matter that goes on in the back rooms of Brussels—that is a key point.
As David Nish said, we are doing a lot of lobbying on the issue and we work with all our member companies in that regard. David Nish is right in that we found at the beginning that it was viewed as a UK-centric problem. There is an umbrella organisation called the CEA, which is the European equivalent of the ABI; it is a sort of trade association of trade associations. At the last two or three meetings to discuss the issues, I have noticed a shift whereby there is more understanding that it is not only a UK problem. We work closely here with the FSA and we work closely in Brussels with the Committee of European Insurance and Occupational Pensions Supervisors—CEIOPS—the regulatory authority, and directly with the European Commission. I am more than happy to provide extra technical evidence on the issue and to suggest ways in which the Economy, Energy and Tourism Committee might help. We find intervention by members of the European Parliament particularly helpful in this regard.
I noted some of those issues from what David Nish of Standard Life said. Is anything particularly an issue right now in the development of solvency II?
David Nish touched on the two main issues, which are the liquidity premium and the different tiering of the capital requirements—it is very detailed technical work.
I want to follow up the point about the role of institutional investors. You highlight in your evidence that your members are responsible for 20 per cent of the shares on the British stock exchange. That carries a burden of responsibility. You will be aware of the House of Commons Treasury Committee's criticisms in its evidence to us last week. What expectations should we have of institutional investors playing a stronger role going forward in corporate governance and risk management?
That is another area on which I would welcome the opportunity to provide written evidence, if the committee so wished, because so much is going on. The first point to make is that institutional shareholders recognise that they could have done, and should do, more. One of the difficulties is in gaining traction. The example that John McFall gave at last week's committee meeting was that of an institutional investor going time and time again to one of the banks, but just being rebuffed.
We are doing quite a lot of work in this area. We are very supportive of the Walker review and we have recently been working on a new institutional shareholder code. We have brought together the main big trade associations representing the institutional shareholders: the ABI, the Investment Management Association and the National Association of Pension Funds. We are putting together a code that will enable institutional shareholders to see what best practice is in corporate governance, remuneration and shareholder engagement. The institutional shareholders would be invited to join up and comply with the code, which is to be overseen by the Financial Reporting Council. We are working on the details of how the code would operate and how the FRC would oversee it. There is therefore acknowledgement that we must do more and that there must be better ways of getting traction and bringing institutional shareholders together so that they can coalesce—that is the start of our work.
I will ask about a different and unrelated issue. In the various inquiries that are going on—and indeed during this morning's questioning—a number of individuals have dwelt on the breadth of Scotland's financial services sector, making it clear that we should not simply concentrate on the banks. Moreover, in our evidence sessions with the banks, concerns have been expressed that although jobs in Scotland might not have been hit disproportionately, headquarters functions are discernibly drifting south of the border. Does it matter to the insurance industry's success and prosperity whether significant banking operations are headquartered in Scotland?
Did you say "significant banking operations"?
Yes. Is what happens in Scotland's banking industry immaterial to your members' wealth, success or talent pool? I am simply trying to get some sense of the interrelatedness of the two sectors.
The sectors are interrelated, but let me unpick that a little bit. Many of our biggest members are bank assurers. For example, Scottish Widows, which is the life and pensions bit of the business that I deal most closely with, is ultimately part of Lloyds, and the insurance arm of the Royal Bank of Scotland is a very strong business. There is certainly an interrelatedness at a business level and, in that sense, the issue matters a great deal.
But beyond those kinds of insurance activities does it matter to you whether the banks are headquartered or have a significant presence in Scotland?
Any business will have a number of reasons for deciding where to headquarter itself. That is a matter for the banks. The insurance industry works with banks all over the UK and globally, but I still think that the running of the businesses is interrelated.
I have already sought from Mr Nish clarification about concerns about solvency II. How might the process affect people with asbestos-related conditions, particularly in light of last week's decision in the Court of Session on pleural plaques?
Unfortunately, I cannot answer that question at the moment because we are still working through solvency II to find out what it might mean for capital requirements for businesses at a European level; how it might affect each business, which will depend on its business mix and the types of business, such as annuities, that it writes; and then how it might affect specific business classes. I am perfectly willing to seek more information from the insurers and to share with the committee whatever I can get.
To be honest, I have to say that, as I was reading the evidence, I found the solvency II issue confusing and was unsure about how it might affect people in Scotland. If you can find any examples that might help to clarify whether people with asbestos-related conditions will be affected, that would be helpful.
It will be a bit difficult because it is all a bit of a moving feast at the moment, but we can certainly try to work something out. The clearest example that I can give at the moment is annuities, which I mentioned earlier. If you are writing an annuity business, you have to put aside a certain amount of capital because you are guaranteeing someone that income for life. If solvency II means that you will have to set aside more capital, it will affect the amount of annuity that you will be able to give someone for the pot that they buy. That is probably a bit simplistic, but if such examples help I will certainly do my best to see what I can get.
That would be good.
A report in the Sunday Herald at the weekend suggested that the FSA is now keen to look at business models to ensure that what has happened over the past 18 months or so does not happen again. Do you think that if that approach had been taken beforehand businesses would have been in a better position and the likes of Northern Rock could have been saved earlier and in a different manner? Would that have been beneficial? I know that that is a hypothetical question.
I will try to answer, although I am not an expert on banking. What you are alluding to goes back to my opening remarks. Any ABI member would say that, for quite a long time, the FSA has paid quite a lot of attention to its business. As I said, the regulatory regime for the insurance industry was overhauled in 2001 to 2004 and the individual capital adequacy regime was introduced. We in the industry felt that that had a lot to do with the fact that we weathered the storm rather better.
The FSA's supervision is quite intense; I have been at the other end of an arrow visit and it is quite an intense process. From personal experience, I know that the process is robust. However, the supervision of the businesses must also be appropriate, not just in terms of the level and type of supervision. It is very important that the people from the regulator who are supervising have the appropriate expertise to do that—they must understand the sort of businesses that they are supervising so that they are able to supervise appropriately.
I am not sure whether that helps, but it is the best answer that I can give.
That is okay for now. Thank you.
The so-called hedge fund directive will be debated during members' business in the Parliament this evening. Will the directive have any impact on any of your members? Has your organisation been involved with it?
Yes, we have been involved with the directive and have lobbied quite heavily on it because it will affect the asset management arms of businesses. We have also worked with the Investment Management Association, which is probably more in the frame for it than we are.
The short answer is that, yes, the directive will impact on our members. I am not sure whether there are any specific points that you want to follow up, but I am not an investment manager.
The directive will be fairly time sensitive, as will solvency II. Although we are talking about a European directive, have your members indicated to you anything specific that they want you to raise with the committee and MSPs?
Nothing that they have briefed me on, and I think that they would have done so.
Okay. Let us return briefly to the solvency II framework directive. When we took evidence from some of the banks, they seemed genuinely surprised at the European Commission's powers of regulation, and particularly its interventions at the tail-end of November. Do you believe that the Commission has similarly intrusive powers in respect of insurance and pensions?
Are you asking about European regulators?
Yes.
The difficulty is that the markets are very different. A product that is classified as a pension in the UK can look very different from a product that is classified as a pension in mainland Europe. Therefore, the main difficulties that spring to my mind in relation to European supervision and regulation are less about intensity and more about the fact that the products are so different. For example, an occupational pension in this country is a trust-based operation that is run by an employer, whereas, in Germany, it is more a commercial product. The difficulties are more about the fact that pensions and life insurance are different across Europe than about the intensity of supervision—it is rather the other way round.
As you described it, the initial difficulty with solvency II was that it was seen to be a UK issue. How will your relationship with the CEA change over time to ensure that you do not encounter such obstacles again?
We are a member of the CEA, as are the German and the French equivalents of the ABI. We put a lot of effort into European lobbying, and we are putting more and more effort into it. We sometimes find, partly because the UK insurance industry is a more mature market, that our view is not absolutely aligned with that of all our counterparts from mainland Europe. We continue to lobby heavily.
Another issue that is being discussed is packaged retail investment products, which in this country we would understand as pensions and savings vehicles. The UK is very much further ahead in disclosing to customers how those products are paid for and what the commission levels are. Mainland Europe is significantly behind in that—or significantly different from us, whichever way you want to phrase it. We have spent a lot of time lobbying on that issue. At one point, when the CEA took to the Commission a position that we did not agree with, we requested that a footnote be put in to say that we did not agree with it.
I will raise an issue that I picked up from our questions to David Nish. He talked about insurance companies being a source of money for investors in investors and cited private equity. Robert Peston was one of the first people the committee interviewed in this inquiry. A year or so ago I read his book, "Who Runs Britain?", in which there is both a rather dewy-eyed exultation of the big beasts of private equity and a tragic chapter about the collapse of secure final salary pensions. How does that hit? What is the impact of that juxtaposition between the cash going in one direction to private equity, which has not had the best of years in the past year, and the demolition of what Peter Drucker once called "pension fund socialism"?
Wow. The first point is that defined benefit pension schemes are more properly represented by the National Association of Pension Funds, but ABI members have a keen interest in the area, because we provide a lot of the underlying investment. My second point also pertains to the European issue, because as an animal such schemes do not exist in Europe in the same way as they do here, which creates a lot of difficulties for us in relation to lobbying and understanding in Europe. The schemes could also be affected by solvency II. Defined benefit schemes have, over the years, required more and more funding from the employers that support them, which has been a key factor in more and more employers moving away from them. The volatility of the funding is also an issue, as is the fact that the cheque book is open-ended, if you like, which is a pressure on employers. An employer in a defined benefit scheme has to meet its liabilities and has to do what it says it will do, until it finally says, "No, I will no longer take this animal forward." That is the point at which it acknowledges that there are pressures that are making it withdraw from defined benefit schemes.
A side provision, which may come along after solvency II, is a sort of solvency II for occupational pensions, which would push the funding liabilities for defined benefit pensions still higher. We will lobby on that issue in the future. I am sorry that that is not a precise answer to your question, but it is a difficult one; it is really for employers to decide.
Yes, but, as investors in investors, are you not alarmed, following the euphoria of private equity in 2007 and the first half of 2008, by the course of private equity investment since then?
I am unable to answer that; it is more a question for individual member companies to answer. They would base their views on what they see in relation to investors in investors. That work would be handled by the companies' investment arms.
There has been a fairly hefty collapse in the past couple of years. Assuming that there are companies that have invested heavily in private equity, it is one of these things that will take some time to work through the system before we know what has happened.
I am sorry, but I do not have the expertise to answer your question, so I would not like to tread on it.
At one time, the insurance sector would have had quite a number of members that were mutual businesses. When you listed the big players in your Scottish membership, I did not spot any mutuals surviving. Is that a fair reflection of the position?
There is Scottish Friendly, but I would not call it particularly large. Royal London is actually a mutual.
Is it?
Yes. It does not sound like a mutual because it does not happen to have "mutual" in its name, but it is a mutual. The ABI has mutual members. Royal London is the biggest, and probably has the biggest Scottish presence, but we do not have anything like as many as we used to have.
Do you regard that continuing level of diversity as a strength for the sector?
Diversity in the sector is a strength. It is up to individual members rather than us to choose what business model they run, but when we lobby we take account of mutual interests—that sounds like a pun, but I do not mean it in that way. We take account of the interests of all types of members when we lobby.
One of the points that I put to David Nish relates to the building society sector and its concern about the financial services compensation scheme. I guess that that has an impact on your members too, in the sense that the banking crisis has had knock-on effects across the financial services sector. The building society witnesses from whom we have heard believe that the scheme unfairly penalises them, as their liability to pay in is greater and the likelihood of it paying out to them is reduced. Does your association, or the industry, have a view on that?
We certainly have members who are concerned about the way in which the cross-subsidy operates; I would say that we have similar concerns to those of the building societies.
You have members who have a view, but you have not taken a collective view.
We have, and that is the collective view. There is a great deal to the financial services compensation scheme, and there are broad concerns about it. As an association representing our members, we have concerns, and the element of cross-subsidy—to which I guess you are referring—is one of them.
That is helpful.
One aspect of what is happening in banking that has an impact—certainly in terms of reputation—on other parts of the financial services sector is the remuneration of staff. We have heard a lot of evidence about bonuses in the banking sector, about which there has been controversy. Is there a parallel position in insurance? Is the payment of large bonuses that are separate from salaries a feature of the sector in the same way that it is in banking?
Not quite to the same extent. That is another area in which we need to remember that insurance is not banking. I get slightly alarmed when there is talk about people in financial services all earning lots of money and getting huge bonuses. A lot of people who are sitting in Standard Life house or out at the Gyle, or working for Scottish Widows, earn £15,000, £18,000 or £20,000 a year and get bonuses of 8 or 10 per cent. That is not the same thing at all, and we forget that at our peril. It is very unfair that the whole industry gets tarnished with an image of huge bonuses.
I completely agree with your point that it is often entirely appropriate for people on average salaries to receive a generous bonus. The concern is about the people who are on very large salaries and regularly receive very large bonuses. Is that a feature of your sector at all?
Bonuses are paid, but I do not think that they come anywhere near the sort of bonuses that we see—or saw—among investment bankers. They are not in the stratosphere.
Would there be a recruitment benefit for your sector from bank bonuses becoming more related to the real world?
I do not know—our members might like to comment on that.
We heard from David Nish—we have heard this from witnesses throughout our evidence sessions for the inquiry—that Scotland's assets include its skills base and the pool of expert staff that are available to companies throughout the country. Does your organisation have any input into the skills agenda in Scotland?
No really, but we very much want to remedy that. I am currently acting director general, but my two real jobs are director of life and savings, and director of Scottish affairs. The post of director of Scottish affairs was created about a year ago, because we wanted to do much more work as an association in a specifically Scottish context.
We began to pick up on the concept of personal finance education in schools, which is a wider topic than the skills base. I have had a couple of meetings in which we have started to explore that, but I am—and the association is—interested in doing more work in that area. We run a small future leaders forum for ABI members, and many of the future leaders who come through that are employed by our Scottish members. There is a bit of work going on, but we would like to develop that area.
Do Scotland's universities and colleges produce the right calibre of graduate for your industry?
Yes. Scottish ABI members always cite that as one of the key factors that keep them in Scotland. We have only to look at the anecdotal evidence on the number of people who come through Scottish financial institutions and move around them—from Standard Life to Scottish Widows to Aegon or Scottish Life, for instance—to see that, by and large, the universities produce the right calibre of graduate. The skills base is important, and the links between the universities and the ABI member firms are becoming better.
If the committee were to make a recommendation on that agenda, what should it be?
I would like to think about that a bit more. I make a personal observation that we need to think about the fact that it is not only about university-level qualifications but about people coming straight from school and going into jobs that can be rewarding, are well paid and offer good careers. However, I would like to come back to that, if I may.
We touched on the responsibilities of institutional shareholders. The Treasury Committee at Westminster has described institutional investors as "supine and ineffective". The corporate governance of the banks seems to have been wanting, certainly in RBS and HBOS. Have institutional investors, of which ABI members are a fairly significant part, done enough to ensure that the banks' boards assess risk properly? Have they done enough on remuneration policies and the bankers' bonuses about which we hear so much? Do institutional investors take a sufficiently strong role in trying to ensure that issues such as remuneration are dealt with satisfactorily?
The new institutional shareholders code about which I spoke earlier is an acknowledgement that institutional shareholders agree that they need to do more. The code covers all aspects: shareholder responsibilities, remuneration and governance. If the committee is interested, I am more than happy to send a copy of the code for it to examine.
We believe that this is the first time that an institutional shareholders code has been developed. We do not know of other countries with a similar code but we have had interest from France and Norway in developing one. I would be more than happy to share it. It is intended to do precisely what you ask about.
Does the code cover, for example, the information that is made available to institutional investors so that they are able to make judgments about whether boards are operating effectively?
I believe that there are such references, but I will need to go back and check how far the code goes. David Nish's point that there is a limit is relevant to that. People sometimes seem to think that institutional shareholders have more information than they do. I will double check the code and, as I said, I am more than happy to send you a copy.
The committee would welcome a copy of the code. That would be good.
I will finish on what I hope is a more positive point: are there any particular strengths in the insurance or asset management industries in Scotland that will help to contribute to the viability of Scottish financial services?
We have touched on the skills set and we keep coming back to it because it is of absolute importance.
I did a lot of work recently with Aviva on the work that it has done at Perth and in setting up its operations at Bishopbriggs. It was very appreciative of the work that local government and the Scottish Government had done to help it in that regard.
The hub concept seems to work really well. We have a hub or centre of excellence—call it what you will—in Edinburgh and beyond for life and pensions, and we are developing one in Perth for the general insurance side. That becomes self-perpetuating because, once people realise that they can get a decent job in an area, they go there, like it and get another decent job there.
I am not sure how such hubs start, but our members value them. There is an interplay between the skills set and the general idea that that is the place one goes to. In the same way as some people decide that they must go and work in the City of London, if somebody wants to get pensions expertise, Edinburgh is a good place to be. It would be important to continue and develop that.
We talked about lobbying in Europe. I am curious to know why there might be different models in Europe for what we call pension products here and why that is such a problem when lobbying for the types of business that we do through Scotland's insurance companies.
One reason that there are so many different types of pension products is historical—they have just grown up differently. Another reason is the fact that models for private sector pensions are driven by the social, labour and tax law in different countries. For example, if a country provides very high state pensions, there is less need for a private sector pension industry. That is a crude example, but it is the sort of factor that plays in.
Reference has been made to the lobbying issues that can be created. For example, the defined benefit pension sector in this country is a commercial enterprise in terms of underlying investment, but the pension scheme for company A does not compete against that for company B. What are called occupational pension schemes in Germany, for example, are commercial products, so the term occupational pension means different things in different countries. In one country, people might think that proper competition law-type arrangements are needed in the area, but we in the UK would not, because here occupational pension schemes are not competing products. That is an example at a high level, but I hope that it gives members a flavour of some of the issues.
It is useful to see what the discussion is about.
The hub concept sounds positive. I do not want to sound negative, but there is a potentially negative aspect to it. I will use the example of Perth, which is focusing on general insurance. Further down the line, if Aviva wants to restructure and its facility in Perth closes, 1,600 people will no longer be in employment. I am sure that you agree that putting all our eggs in one basket in one area is a potential negative.
I understand your point. Perth is a very new hub. Lots of companies come to Edinburgh and want to stay because they know that the expertise is here. If something happens to company A, there may be jobs at company B. In any industry, using any business model—hub or otherwise—there is always a danger that companies will move or things will change. However, once a hub is up and running and more than one company is operating there, it can be helpful.
That concludes the session. Thank you for coming along to today's meeting and for the information that you have provided; once again, I apologise for the delay in bringing you on board. It would be helpful if you could provide the additional information that you mentioned. The committee is keen to give any help that it can usefully provide on solvency II and European hedge fund regulations.
Thank you for your time.
In light of the information that we have received on solvency II and hedge fund regulations, I propose to write to the Cabinet Secretary for Finance and Sustainable Growth, John Swinney, to ask him, in advance of his appearance before the committee in a few weeks' time, what action the Scottish Government has taken on those issues.
Members indicated agreement.
Further to last week's discussion in relation to the Treasury Committee, we are bidding for funding from the Conveners Group for a visit to London—probably on 26 January, if we get approval in time. We will be able to attend a meeting of the Treasury Committee, to have an informal meeting with members of the committee afterwards and, I hope, to have meetings with other organisations, including the FSA. Even the Bank of England may let us in—who knows? We will try. I wanted to advise members in advance that the visit may happen on 26 January, at fairly short notice. It will take place subject to the approval of the Conveners Group, which will consider the bid next week.
Next week we will take evidence from State Street, which is an asset-processing organisation, on some of the backroom activities that happen in Scotland. We are still trying to get someone from the asset management industry to give evidence to us.
Meeting closed at 12:59.