An internal inquiry by the Financial Services Authority has severely criticised its own performance in the Equitable Life scandal.

Equitable closed to new business last December after the House of Lords overruled its position on guaranteed annuity prices, written in the 1970s and 1980s, when interest rates were much harder.

The Baird Report, published yesterday, recommends a more proactive approach by the Financial Services Authority to ensure that customer interests are protected. It also calls for improved solvency and disclosure standards, and better ways of evaluating risks. The FSA is urged to improve its internal communication and co-ordination, as well as improve business regulation and supervision.