The FSA has confirmed new rules designed to secure funding for the Financial Services Compensation Scheme (FSCS) in a way which is affordable for firms. Comments on the proposal are requested by 18 February, 2013.
The paper includes a revised proposal on the FCA retail pool from that in CP12/16. So, to give stakeholders the opportunity to comment, the FSA is consulting again. This is over a shortened one-month period, to ensure that, depending on the outcome of this revised consultation, the new funding model can be implemented from 1 April, 2013. Comments on the proposal are requested by 18 February, 2013.
The main features of today’s paper are:
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there will be no changes to the current funding classes;
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the proposals for thresholds based on assessments of affordability will be taken forward;
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the FSA will consult on a proposal for FCA regulated providers to make contributions to the FCA retail pool, when an intermediation class breaches its threshold, rather than just those providers that participate in the FCA FSCS funding classes. The consultation will run until 18 February 2013.
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from 1 April 2014, the FSCS will be able to smooth the impact of levies by looking further ahead at potential compensation costs expected in the 36 months following the levy instead of 12 months as is currently the case (except for the deposits class).
Press release
Consultation
Providers including banks and insurance companies may be forced to part-fund compensation costs sparked by the failure of intermediaries, after the FSA re-drafted proposals on funding the Financial Services Compensation Scheme (FSCS).
The pool - triggered once a funding class compensation threshold (currently £100 million for investment advisory firms) is breached - would have been funded by intermediaries and investment providers only. However, re-drafted proposals suggest all provider firms regulated by both the incoming Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA) should have to contribute also.
The FSA said this is because all firms subject to FCA regulation will have a "mutual financial interest" in maintaining the confidence of consumers who use the markets in which they operate. It acknowledged this "undermined the exclusion of product providers from the FCA retail pool".
Further reporting: Providers to part-fund advisers' FSCS costs in FSA u-turn © Incisive Media Investments Limited 2013
© FSA - Financial Services Authority
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