Outlook: About as damning as it comes for the Pru

The wheels of officialdom grind slow but the wonderful thing is the way they usually get there in the end. Yesterday's public censure of the Pru over the antics of its 5,000 strong direct sales force by the Financial Services Authority, is about as damning as they come.

This partly reflects the inability of the FSA to levy fines on those whose conduct falls below acceptable standards. In the absence of an exemplary fine to demonstrate the degree of its unhappiness, the FSA is prone to throw both the book and the thesaurus, calculating that the damage to commercial reputatipn will be just as grave.

Think of a financial instrument - life assurance, unit trusts, pensions - and the Pru sells it. Think of a regulatory shortcoming and the Pru has been guilty of it - failure to train, deep seated and long-standing management failures, a cultural disposition against compliance, unsuitable sales, failure to remedy previously identified defects. You sort of get the picture.

The man from the Pru, Sir Peter Davis, has been preparing for the onslaught since the FSA's hit team went in last January appointing compliance directors, overhauling the structure of the business and finally throwing Jim Sutcliffe, head of the domestic life assurance business overboard in September and taking direct control of the UK retail businesses himself. As a final olive branch, he even volunteered to join the Personal Investment Authority, something his predecessor, Mick Newmarch could not bring himself to do.

But the question that is rather left hanging is whether Sir Peter could and should have acted earlier. By May of next year he will have been at the Pru for three years. Many of the shortcomings that the FSA identified in January were the same failings it had noted in 1995 and 1996. The reason for yesterday's public censure lies in the Pru's failure to act on a stream of earlier warnings.

If there is a fig leaf in the statement of censure it is the FSA's acknowledgement of the wide-ranging corrective action embarked on by the present management. This was enough to lift the spirits of the market, which took it as a clean bill of health for the new look Pru and decided to ignore the FSA's more ominous reference to "the extent to which redress is appropriate" in respect of past business which has been missold.

This is a long way from a ringing endorsement of the new regime. The Pru and Sir Peter have been put on notice that further failures on the scale of those which have previously taken place will not be tolerated. Now that it is part of the PIA, the Pru can be fined and now that Sir Peter has taken personal charge the buck will stop with him.