The business - Patrick Hosking fears more Equitable Lifes

Equitable Life management glossed over the truth in the days when executive pay packages provided li

Leafing through the Penrose report into the Equitable Life debacle, I am pole-axed by the eye-watering jargon. Yes, life assurance is a complicated business, but does it really have to be quite so swamped in actuary-babble? More than a week after publication, I confess I have barely scratched the surface of its 817 pages (£79 from the Stationery Office). The noble Lord Penrose has done his best to help with a glossary, but I keep bumping into terms such as "Wednesbury reasonableness" and "quasi-zillmerisation" and I'm running short of wet towels.

It's an important document. More than a million policyholders have lost out from the collapse of the once great mutual. Depending on how you measure such things, they have lost out by anything up to £3.5bn. Confidence in the entire savings industry has been dented. The ripples extend far and wide: the buy-to-let mania has been puffed up in part by burnt savers retreating to the perceived safety of bricks and mortar. Billions in compensation lawsuits may rest in part on the report's findings.

The second thing that immediately strikes you in Penrose is the sheer longevity of the disaster. The seeds of Equitable's destruction were first sown in 1983, a good 15 years before anyone outside the society had an inkling that anything was wrong. From that time the executives started promising more in bonuses than Equitable could afford. A culture of management "manipulation and concealment" went back to this time. Throughout the 1990s the accounts were "not truly reflective of the society's financial position". The famous House of Lords judgment in July 2000 - requiring the society to pay in full annuities it had guaranteed - was just the final nail in the coffin. The fascinating thing is that the truth could be concealed from so many people - regulators, policyholders and non-executive board members - for so long. And that goes back to my first point - the sheer impenetrability of the gobbledegook. All outsiders were, to a greater or lesser degree, dependent on an accurate and honest assessment of Equitable's balance sheet strength by the executives. It took the arrogance and secretiveness of one autocrat - Roy Ranson, chief actuary and later chief executive - to set in motion a snowball that produced an avalanche.

What is frightening about Penrose is that this mismanagement occurred when there were no big financial incentives for managers to gloss over the truth. Executive pay and performance-related bonuses at the society in the 1980s and early 1990s were extremely modest by today's standards. Now, by contrast, executives in dozens of financial institutions owe their seven- or eight-digit packages to the apparent strength of the numbers. The temptation to flatter the accounts or conceal losses is far greater than in Ranson's day.

Meanwhile, in many corners of the financial services industry, the complexity is greater than ever. Derivatives - complex financial instruments devised by and traded by rocket scientists - bestrew every area from banking to fund management. The opportunity for financial prestidigitation has never been greater. It is highly likely that somewhere catastrophes of similar or greater magnitude to Equitable are already invisibly maturing.

Antofagasta, a Chilean mining company, has quietly been listed on the London Stock Exchange since 1888, where the cognoscenti know it as "Fags". It began life building a railway from the Pacific Coast, climbing 12,000ft through the Andes to La Paz in Bolivia. The recent boom in the copper price has catapulted Antofagasta into the FTSE 100. Thanks to rising raw material prices, the Footsie boasts no fewer than five mining giants in its ranks. The others are BHP Billiton, Anglo American, Rio Tinto and Xstrata. Together they are now worth £52bn, which is 5 per cent of the whole index. Together they boast not a single mine on British soil.

It is fitting to see Norman Lamont profiting from hedge funds, those exotic City beasts that caused him so much grief 12 years ago. The former chancellor was famously outgunned in 1992 when hedge funds and other speculators bet against him. They won, sterling was forced out of the Exchange Rate Mechanism and a few months later he was out of a job. Now Lord Lamont, he is a non-executive director in a small fund management boutique called RAB Capital, which runs several hedge funds and came to the stock

market on 16 March. As well as his £25,000

annual director's fee, he was issued with one million share options. Within minutes of RAB floating, Lamont had made a paper profit of £125,000. Close reading of the prospectus shows that Lamont is doing rather well for himself on

the directorships front. He has 23 of them.

Patrick Hosking is deputy City editor of the London Evening Standard

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