FSCS funding review set for more delays
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A review of Financial Services Compensation Scheme funding could face further delays after European institutions put the investors compensation scheme directive on hold as they cannot reach agreement in key areas.
The FSA aims to consult on a review of FSCS funding in the first half of this year after a lack of clarity over European legislation and the new UK regulatory structure had delayed earlier attempts to begin reforming the compensation scheme in 2009.
However, the positions of the European Commission, the European parliament and European Council are still too far apart to drive the directive forward.
The council says the maximum guaranteed level of compensation should be increased from the current €20,000 to €30,000 while the European Commission and the European parliament say it should be €50,000.
The three bodies agree that individual compensation payouts should be capped at €100,000. The council does not want schemes to be pre-funded while the EC wants national schemes pre-funded within 10 years and the parliament within five years.
Now they have established their positions, the three institutions would usually meet to decide on a the final version of the directive. However, a council spokesman says: “At this point, the positions of the council and parliament are too far apart for trialogues, so no date is scheduled.”
European parliament economic and monetary affairs committee member and Conservative MEP Syed Kamall says: “It is not a priority for the Danish presidency, so I think this is in the long grass unless the bilateral conversations find some flexibility on the institutions’ positions.”
Cicero Consulting Brussels analyst Tim Gieles believes that finding a middle ground between the proposed payout levels will be easier than achieving consensus on the principle of whether to pre or post fund the scheme.
An FSA spokeswoman says: “We understand that industry has concerns about the FSCS funding model and wants to move to formal consultation as soon as possible.”
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Readers' comments (5)
Tricia Yates | 20 Jan 2012 9:01 am
And whilst the funding model is delayed more IFA's will go out of business or simply give up.
But that is probably the intention.
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Ned Naylor | 20 Jan 2012 9:01 am
These organisations need to Jaw Jaw and get this mess sorted out poste haste, pre funding is the only sensible, commercially viable and ultimately consumer friendly way of funding any compensations scheme and the best method would be a product levy built in to the charges and transparently identifiable.
Much the same way car insurers build in an element into their premiums for the costs of claims, uninsured drivers etc.
Has no one at the top of these organisations have any common sense?
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Julian Stevens | 20 Jan 2012 9:07 am
An FSA spokeswoman says: “We understand that industry has concerns about the FSCS funding model and wants to move to formal consultation as soon as possible.”
The industry does indeed want a formal consultation, but will it get it? What will be the terms of this consultation? Will all submissions be published for all to see and to debate in open forum, as they should be, or will they, as usual, be kept firmly locked away from prying eyes, with the FSA claiming merely to have "taken them on board"? That isn't consultation, it's merely going through the motions, a token sham of consultation.
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Nick | 20 Jan 2012 9:08 am
No Ned - they have no sense at all!
and yes that is the intention Tricia
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Nick | 20 Jan 2012 9:11 am
in my experience Julian all the FSA consultations are a sham!
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