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                      HELD ON THURSDAY 17 JUNE 2004 AT

Present:           Callum McCarthy (in the Chair)
                   Moira Black
                   Clive Briault
                   James Crosby
                   Tom de Swaan
                   Kyra Hazou
                   Deirdre Hutton
                   David Kenmir
                   Sir Andrew Large
                   David Miles
                   Gillian Nott
                   Shamit Saggar
                   Hector Sants
                   Hugh Stevenson
                   Stephen Thieke
                   John Tiner
                   Clive Wilkinson

In attendance:     Geoffrey King – Secretary (part only)
                   Jennifer Skeels - Deputy Secretary
                   Andrew Whittaker - General Counsel to the Board
                   Kari Hale - Director of Finance, Strategy and Risk
                   Ron Devlin – Interim Chief Executive of the FSCS (part only)
                   Nigel Hamilton – Chairman of the FSCS (part only)
                   Ruthven Gemmell – Chairman of the SBPP (part only)
                   Michael Quicke – Former Joint Chairman of the SBPP (part only)
                   Stephen Bamfylde, Saxton Bamfylde (part only)


  Mr McCarthy welcomed Hugh Stevenson to his first Board meeting and Kari Hale who had
  joined the FSA on 1 June 2004 as Director of Finance, Strategy and Risk. Stephen
  Bampfylde was also attending the meeting as an observer, as part of Saxton Bampfylde's
  review of the Board's effectiveness.


  No apologies had been received.

  Life Assurance Realistic Reporting

  Members of staff from the Retail Firms Division joined the meeting and the note
  accompanying their presentation was circulated.

  Staff outlined the context in which the introduction of realistic reporting had been made.
  Realistic reporting would apply only to with-profits funds valued at more than £500mn and
  would come become part of the Prudential Sourcebook rules with effect from
  31 December 2004. Firms would be required to provide capital to cover the higher of
  "regulatory" or "realistic" calculation of liabilities, under the twin peaks method.

  Staff outlined the with-profits methodology and how the initiatives introduced by the FSA
  (including the work on the Principle and Practices of Financial Management and treating
  with-profits policyholders fairly) were intended to make with-profits products and the
  strength of firms' with–profits funds more transparent. Ms Varney explained the old style
  regulatory valuation method and contrasted it with the new style realistic reporting.

  The new requirements would benefit consumers as they would enable intermediaries and
  IFAs to explain more clearly to consumers the relative strengths of various funds and so to
  help them to choose the appropriate fund.

  Mr McCarthy thanked the staff for the presentation which had been useful and


  Mr McCarthy noted with pleasure the Honours recently bestowed on Deirdre Hutton who
  had been made a Dame; Norman Digance, who had been made an MBE; and Oliver Page,
  who had received an OBE. Carol Sergeant, a former Director of the FSA, had received a
  CBE. The Board expressed its congratulations to all four.
As requested by Mr McCarthy, Mr Bampfylde outlined the plans for the forthcoming
review of the Board's effectiveness. The final report would come to the Board in


Minutes of the last FSA Board meeting

The minutes of the Board meeting held on 20 May 2004 were agreed.

Mr McCarthy updated the Board on the progress towards publication of the Sandler
Consultation Paper, which had now been issued. A copy of the press release was
circulated, together with HM Treasury's press notice on charging caps. The Board would
revisit the issues in due course.

Copies of the printed version of the Report and Accounts would be circulated to Board
members the following week.

Oral Report on Risk Committee meeting held earlier in the day

Mr de Swaan reported on the issues discussed at the Risk Committee meeting.

Matters arising not covered below

The schedule of matters arising was noted.


Insurance Prudential Sourcebook Policy Statement

The Board endorsed the Executive's decision to proceed as planned.

Annual Open Meeting

Mr McCarthy noted that plans for the Open Meeting were proceeding and several Non-
Executive Directors would be chairing breakout sessions. All Non-Executive Directors
were invited to attend and were asked to let the Secretary know if they wished to do so.

Client Money for General Insurance

Mr Briault outlined the recent discussions with firms and undertook to revert to the Board
with further detail on this point.


Mr de Swaan left the meeting.
Mr Tiner updated the Board on recent developments.

Power of Attorney

Mr McCarthy reported that the Committee of European Insurance and Occupational
Pensions Supervisors was located in Frankfurt and had been established as a German not
for profit company "CEIOPS eV". Mr Tiner had signed the company's Articles of
Association in his capacity as one of the 7 founding members of the company, required
under German law. A power of attorney had been sealed on the Board's behalf on 26 May
2004 to enable Mr Tiner to do this and the Board ratified this arrangement.

Re-appointment of Practitioner Panel member

The Board agreed to the re-appointment of David Hardy, Chief Executive of the London
Clearing House, to the Practitioner Panel for a further three years until 31 May 2007. Mr
Hardy's appointment ensured that the requirement in FSMA for the Panel to include a
representative of a recognised clearing house was met.


End-to-End Review of the Enforcement Process

Members of staff from Enforcement Division joined the meeting and introduced the paper.
The purpose of the review was to streamline and simplify the enforcement processes
introduced at N2, making appropriate use of IT resources.

The Board thanked the enforcement team for a comprehensive and helpful paper and noted
that they would consider further papers in due course.

With-Profits Review and Making CP207 Rules

Staff from the Retail Firms Division joined the meeting and updated the Board on recent
work to reform with-profits products, and suggested ways in which the success of the
project could be measured.

Staff outlined the changes made to the proposals in CP207, in response to representations
received from respondents and the Independent Panels.

Board members decided to re-consult on the proposals for three months from July. Mr
Strachan and his team were asked to revert to the Board in due course with an update.

Financial Service Compensation Scheme Annual Report 2003-2004

Mr Hamilton, Chairman, joined the meeting and introduced Mr Devlin, Interim Chief

Mr Hamilton outlined FSCS's approach to management expenses and outsourcing of work,
in relation to changes in case handling capacity.

Mr Devlin outlined the methods used by the FSCS to assess costs and to ascertain the time
take to deal with each type of case. Performance measures were being developed and an
update would be provided to the Board in due course. At Board members' request, Mr
Devlin provided further detail on the payouts on mortgage endowment claims.

Mr McCarthy thanked Mr Hamilton and Mr Devlin for their helpful and comprehensive
responses to Board members' questions. The Board noted that Mr Hale and Mr Devlin
would shortly meet to discuss budgeting processes in more detail.

Small Business Practitioner Panel Annual Report 2003-2004

Ruthven Gemmell, current Chairman, and Michael Quicke, former Joint Chairman of the
SBPP joined the meeting.

Mr Quicke introduced the Panel's Annual Report and reflected on his five years as Joint
Chair of the Panel. Mr Gemmell outlined the changes he intended to introduce, as the new
Chairman of the Panel, building on the results of a review of the Panel's effectiveness.

Mr McCarthy thanked Mr Quicke and Mr Sanders for their work as Joint Chairmen and
asked Mr Gemmell to let the Panel members know that the Board looked forward to an
ongoing constructive relationship.

Mr Quicke and Mr Gemmell welcomed the Board's interest in the issues raised by the
Panel and confirmed their interest in developing links between the Panel and the Board.


Complaints Commissioner Appointment

Ms Hutton updated the Board on progress with appointing the new Complaints

Structure of the Office of the Complaints Commissioner

The paper on the structure of the Complaints Commissioner's office was noted.

Making Rules and Guidance
      Mr Whittaker referred to the instrument in the paper dated 17 June 2004, and outlined the
      background.      Having satisfied itself that it was able to do so, the Board made the
      instrument containing rules and guidance for the Handbook in accordance with the
      resolution set out in the appendix.

      Draft Notice of the Annual General Meeting

      The Board approved the Notice of the AGM, which would be held at 2.00 pm on 15 July


      Mr McCarthy outlined his initial thoughts on the agenda for the Awayday in October and
      asked Board members to let him know if they had any specific issues that they would wish
      to discuss.

      A dinner for members of the Consumer Panel would be held on the evening of 14 July, at
      the FSA.


      The next Board meeting would take place on Thursday, 15 July 2004 at 2.05pm, and would
      be preceded by the Company's Annual General Meeting at 2.00pm.

      The Annual Open Meeting, as required by FSMA, would take place from 10am on 15 July
      at the Chiswell Street Brewery.

Jennifer Skeels
Deputy Company Secretary

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