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FCA may consider FSCS ‘incentives’ for firms that avoid default

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The Financial Conduct Authority may consider a radical shake-up of the Financial Services Compensation Scheme levy by offering incentives for firms that avoid default.

The FSA December board minutes, published today, show the regulator discussed whether the proposal should have been included in the FSCS funding model review.

It states: “[The FSA board discussed] whether a more radical approach should have been taken providing, for example, incentives for firms to manage themselves well and avoid default, and assist others in the pool to apply peer pressure to improve management and conduct. It was agreed that this was an issue to which the Financial Conduct Authority board might return in due course.”

The board discussed whether to create smaller classes within the FSCS but decided it would be potentially “unsustainable and over-complex”.

There was also discussion around which firms should provide the extra support if the class thresholds are breached.

The minutes state: “The discussion covered in particular the impact on the investment fund management class, issues around affinity in the pool and recognition of providers’ responsibility in terms of product development and design.”

The board also discussed how to handle dual regulated provider firms’ conduct activities and how their customers can retain the confidence of FSCS support.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. The possibility of a prison sentence may focus the mind a little.

  2. Isn’t “manage themselves well and avoid default” setting the bar a little low?

  3. A good place to start would be an unequivocal declaration on the part of the FCA that there’ll be no more hindsight witch hunts and no more abrogations of responsibility for failures such as ArchCru or KeyData.

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