Iceland retrieval sees FSCS recoveries reach £756m
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The Financial Services Compensation Scheme secured recoveries of £756m during 2010/11, with £614m relating to failed Icelandic investment bank Kaupthing Singer & Friedlander.
Its annual report and accounts reveals that £21m was recovered from the estates of failed firms over the last financial year, excluding the big banking collapses of Bradford & Bingley, KSF, Heritable Bank, Lansbanki and London Scottish Bank in 2008. Recoveries relating to the failed banks, known as specified deposit defaults, totalled £735m.
This breaks down as £99m from Heritable, £614m from KSF and £22m from London Scottish.
B&B’s branch network and savings book was sold to Santander, with the mortgage book held by the Government. B&B management has forecast a full return of the £15.7bn paid out by the FSCS.
Recoveries made by the FSCS reduce the amount that is raised by levy-payers. In the case of the banks, the FSCS borrowed from the Treasury to cover the cost of compensating savers who lost out when the banks collapsed.
The FSCS is currently repaying the loans on an interest-only basis but will have to repay the full amount in April 2012.
Recoveries made from failed banks will help to reduce the amount the FSCS owes to the Government.
The £28m recovered from Norwich & Peterborough Building Society for Keydata claims has not been included in the total recoveries as it was secured after the FSCS financial year had ended.
The FSCS says: “We are engaged in an active dialogue with HM Treasury about refinancing these costs, including a repayment schedule. Until a repayment timetable is agreed, it is not yet possible to say which class or classes will be levied. We will keep levy-payers regularly, fully and clearly updated on developments.”
Baronworth Investment Services director Colin Jackson says: “The FSCS should do everything in its power to recover monies so it can reimburse organisations that pay the levy.”
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Readers' comments (2)
Paul Howard | 7 Jul 2011 9:19 am
Question is - can the FSCS actually go to it's levy papers to repay the Treasury Debt?
The Government/FSCS stepped outside of the FSCS rules to repay all savers in the failed banks - not just to the 'lawful' FSCS level.
Therefore, should the industry be expected to pay for something outside the rules and to which they were not given the opportuity to dicuss?
Should a levy ever occur, I can see some interesting legal challenges being made - to which a court of law would have to uphold (on either of the basis of the legality of the decsion - or Human Rights of the levy payers being Infringed)
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Phil Castle | 7 Jul 2011 11:09 am
I agree with Paul Howard.This is a delayed problem. The loan to the FSCS from the Treasury actually distorted the system as with Keydata&Pacific Continental, the excess over what the intermediary sector had to pay fell on the larger investment sector. Ironically the same should have occurred the year before with the banking collapse, once the pool limit was exceeded different pools INCLUDING IFAs should according to the rules have paid for the bank failures.
What happens when we get to 2012 and the FSCS loan has to be paid back and it exceeds the banking Pool? Will we be asked to pay towards the overlap when it should have been pre RDR firms who should have done, when it will only be those who have decided to stay who will be hit?
This is a mess the F-pack were warned about (I have my email correspondence with them as I suspect many oteher IFAs do)
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