THE Penrose Report and the Government's response to it will do nothing to enhance confidence in the security of financial services.

Judge Penrose concludes that Equitable Life was the author of its own misfortunes, and that the regulatory framework was not stringent enough to keep the management in check.

It seems somewhat unjust, therefore, that the only innocent parties in this sorry saga - the 750,000 Equitable policyholders - are the only real losers.

However, while their claims for compensation are strong, the Government's reluctance to meet the claims are understandable.

Such a concession would set a dangerous precedent and make the Government liable for future errors and failings by the management of other financial institutions.

There needs to be an urgent review of the regulatory process. It is clear from the plight of Equitable Life that the danger signs are overlooked.

Institutions need to be more transparent and the regulators need to be more thorough.

The financial services industry has had a torrid time in recent years, partly because of market conditions but also because of its own inadequacies.

There are genuine concerns among the general public about savings and pensions. The bitter and painful experience endured by Equitable Life customers does not ease those concerns.

The Government is keen to encourage people to make their own pension provisions, rather than rely on the state to fund them in retirement.

It is a prudent policy to pursue. But it is unfair to expect people to put their hard-earned savings at the mercy of poorly-managed companies and an inadequate system of regulation.