Calls for ‘priority’ FSCS review rejected

The Treasury Select Committee has asked the FSA to prioritise reviewing the funding of the FSCS.

The Treasury select committee has called for the FSA to make reviewing the funding of the Financial Services Compensation Scheme a priority – but the Government has rejected the proposal.

The committee made the call in its report into competition and choice in the banking sector, published in April.

The Government’s response, published today, says the review is a matter for the FSA.

It says: “The FSA has commenced a review of the funding model of the FSCS and will proceed to a formal consultation and cost benefit analysis once discussions on European directives affecting compensation arrangements have been concluded and the Government’s policy on the future role of the FSCS in the context of the reform of the regulatory architecture for financial services has been settled.”

In its April report, the committee said it accepts the FSA is watching developments in Europe before continuing its review, but added an “assessment” of the UK scheme could inform consideration of the Investor Compensation Scheme Directive. The ICSD will have a fundamental impact on how the scheme in the UK is set up.

Last week, the European Parliament voted on a package of amendments to the European Commission’s proposals for the ICSD. They included rejecting proposals to double the maximum guaranteed level of compensation to €100,000, making the scheme pre-funded and making it cover “bad advice”, which was not originally proposed by the EC.

The FSA suspended its review last November but now says it intends to restart it with a three month consultation in November this year.

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