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FSA may bypass Europe in FSCS funding review

The FSA says it may push ahead with its review of the Financial Services Compensation Scheme’s funding model before European directives on compensation schemes are agreed if delays continue.

The regulator’s 2012/13 business plan, published last month, says it aims to complete its FSCS funding review by the end of September.

The review was delayed in November 2010, pending the outcome of the European Commission’s investor compensation scheme directive and the deposit guarantee scheme directive.

The European Council, European parliament and European Commission are deadlocked over both directives and discussions are not expected to progress quickly.

Last week, the FSA published a consultation paper that set out planned rule changes to the compensation sourcebook to enable the FSCS to handle claims and more efficiently.

The FSA says it may push ahead with the review of the scheme’s funding model before Europe agrees its rules if the European deadlock continues. An FSA spokesman says: “We intend to consult on the changes shortly after the final DGSD is published but if negotiations are further delayed, the need to consult on the funding arrangements of the FSCS may take precedence and we would consult separately on these.”

Lansons director of regulatory consulting Richard Hobbs says: “The only way the FSA can meet the September deadline is by going it alone but that risks double trouble by having to change the rules to meet the directive in the future. My forecast is the FSA will wait for clarification from Europe.”

The European Council says the maximum guaranteed level of compensation should be increased from €20,000 to €30,000, while the European Commission and the European parliament believe it should be €50,000.

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.

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  1. Exasperated Me 5th April 2012 at 3:04 pm

    The FSA has been bypassing Europe for more than a decade, look at the IMD, look at any other EU Directive or EU law and you will see it has either been gold plated or completely ignored.

    They should make a comedy film out of it, call it Carry on Regulating.

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