FSA confirms more affordable FSCS rules
The FSA proposed maintaining the existing funding classes but using new annual thresholds based on affordability both of which were accepted and will be overseen by the Financial Conduct Authority and the Prudential Regulation Authority .
The regulator also proposed setting up a Retail Pool, a collective resource funded by intermediaries and the investment providers, which would be triggered if one or more of those classes reached their threshold.
Sheila Nicoll, FSA director of conduct policy, said: “We have listened to industry concerns and want your input on this revised approach for the FCA Retail Pool.
“Finding consensus on this subject is always going to be a challenge but we remain committed to finding a workable solution that firms can afford and live with.”
In light of industry concerns about this approach the FSA is today opening a month long consultation on a proposal that all providers should make contributions when the pool is triggered by the failure of an intermediary.
This would include contributions from banks, insurers and home finance providers.
The FSCS provides compensation for customers if a regulated financial services firm cannot pay claims made against it.
The scheme is based on funding classes which means that contributions from regulated firms are based on the type of business they carry out and are subject to annual thresholds.
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.