Apfa is calling on the FSA to hold the Financial Services Compensation Scheme to account over its escalating running costs and argues the FSCS should be more transparent about the extent of likely Keydata recoveries.
The FSA published a consultation paper last month which proposed a new maximum limit for FSCS management expenses of £94.4m for 2013/14. Management expenses are separate from compensation costs and are not included in the sub-class cap calculations.
Stripping out expenses relating to legacy banking failures, the FSA has proposed an FSCS management expenses budget of £73.4m, compared to £66.4m forecast expenses for 2012/13.
In its consultation response, published last week, Apfa questions why the FSCS is budgeting for an increase in management expenses when it is forecasting a fall in the number of completed claims. The FSCS plan and budget earlier this month forecast the number of completed claims will fall from 44,546 in 2012/13 to 15,982 in 2013/14.
Apfa says: “We believe it is imperative the FSA holds FSCS to account. The costs of regulation increase each year, and we believe more needs to be done to challenge the regulatory bodies, such as the FSCS, about the level of their expenditure. We therefore call upon the FSA to be rigorous in its analysis of the FSCS budget and to halt this increase in costs.”
The trade body also wants the FSCS to be more transparent about how much of the estimated £75m expected in Keydata recoveries relates to Keydata’s administration and how much relates to its ongoing legal action against Keydata advisers.
Sovereign IFA director Mark Hibbitt says: “The FSCS knows its budget has to be met by the industry, but that is no excuse for spiralling costs. I would want to see any cost increases justified.”