Investor fears overdone - FSA chief

FINANCIAL Services Authority chairman Sir Howard Davies today took the rare step of trying to shore up confidence in London's crumbling share market, saying fears that Enron-style disasters were lurking in Britain were overdone.

He told the watchdog's annual meeting that valuations being placed on UK shares were still much lower than in the US, where the Dow Jones Average is trading at an average price-earnings multiple of 24 times compared with 17 times for the Footsie 100.

Many of Britain's accounting standards were preferable to those in the US and Britain's financial institutions had acted 'prudently' in response to recent uncertainty.

'We can't afford to be complacent even though our accounting standards are different from the US,' Davies said. 'But it has not happened here and investor fears in this market appear to be overdone. Our financial services have acted prudently during this period. The banks are strongly capitalised and profitable.'

He threw his support behind the embattled life insurance sector, saying the FSA saw no need to suspend the solvency test the insurers have to meet despite the impact of the falling share market.

Davies attacked split capital trusts, saying this was an 'unhappy episode' in which investors had been misled into thinking they were putting their money in relatively safe vehicles.