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BSA conference: FSCS admits changes needed on levies

The FSCS has admitted to the building society sector that a review is needed into the compensation scheme levies imposed on financial bodies.

Speaking at this year’s Building Societies Association conference in Yorkshire, FSCS chief executive Loretta Minghella admitted that there were inequalities with regard to the levies imposed on institutions.

Building societies have heavily criticised the FSCS for imposing significant levies on the sector in the wake of the recent bank crashes in the UK and in Iceland as they sit in the top ‘deposit taking’ class of the FSCS.

Minghella said: “Lord Turner said at a recent Treasury Select Committee that the FSA will be looking again at how the FSCS will be funded in the future, but it may disappoint you to know that I cannot announce any change to the system today. The FSCS expects to work closely with the FSA in a review of levy classes.

“We believe that while it is right that each class should bear the cost of its own depositors up to a point, classes should be broad enough to be sustainable in all times. It is right to ask, knowing what we know now, how we have to share what is always going to be an unwelcome bill.”

Minghella said the FSCS and the FSA is considering whether a pre-funded FSCS would be a better method of compensation funding or whether the levies should be weighted on risk adjustment rather than risk-based principles.

She added: “We welcome the continued debate about funding. But it is obviously not the time, the bills we are sending out are big enough in these difficult time. The debate should continue, but you should not expect any change right away.”

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