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Banks aiming to thwart FSCS deal

Aifa says Treasury is under fierce lobbying pressure to break up consensus.

Aifa is accusing the major high-street banks of trying to derail an agreement on Financial Services Compensation Scheme funding by fiercely lobbying the Treasury.

Aifa director general Chris Cummings says heavy pressure is being applied on the Treasury by the major banks which are worried the funding review will force them to subsidise other sectors, such as advisers.

There is thought to be growing consensus among industry trade bodies for a combination of two of the four options set out in last March’s FSA discussion paper.

The combination is aimed at allaying the fears of the Association of British Insurers and the Investment Management Association about any adverse effect on their members while dramatically reducing the burden on the adviser community with a level of cross-subsidy.

But Cummings says the big banks are still unhappy with this compromise and are working hard behind the scenes to scupper the plans.

In its March discussion paper, the FSA said it supported option B, which is favoured by Aifa and the FSCS, which would effectively see providers and banks cross-subsidising advisers according to product class, but is now thought to support the combination approach.

A decision could be made this month after the regulator’s board meeting which will be followed by a consultation paper.

Cummings says: “There is a danger that strong lobbying of the Treasury from the big banks could derail the hard work that has been taking place between various trade bodies to ensure the tremendous FSCS funding burden placed on advisers is reduced.”

British Bankers’ Association director of wholesale markets Alex Merriman says: “There is no moral justification for a change in the status quo. Our members should have a responsibility for our own sector but not to underwrite failings elsewhere.”

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