Welcome for FSA deal with Abbey

13 April 2012

SHAREHOLDERS in Abbey National breathed a sigh of relief today as the bank finally agreed to a long-running review of its with-profits life businesses with the Financial Services Authority.

Effectively this means that its Scottish Provident and Scottish Mutual insurance businesses now meet the FSA's tough 'realistic balance sheet' capital requirements with no more suffering for either shareholders or policyholders.

Abbey which has already injected £1.6bn of extra capital into the two businesses said today: 'There is no incremental capital need or adverse charge to profits over and above that which has already been reported.'

Shares in Abbey rose 9p to 499p as investors welcomed the news and some pointed out that this removed what had been a potential poison pill to anyone considering a takeover of the bank.

Policyholders, who have received no annual bonus for the past two years, are unlikely to see it resumed immediately.

The funds will now concentrate on surrender values and terminal bonuses. They will also raise equity content from 28% at Scottish Mutual and 24% at Scottish Provident to around the industry average of 35%.

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