The Treasury is bringing the Financial Services Compensation Scheme into central Government under the draft banking reform bill meaning it will face much greater scrutiny.
The FSCS chief executive will become a Government accounting officer answerable to ministers and parliament. The Treasury says accounting officers require the highest standards of probity in the management of public funds.
The Office for National Statistics reclassified the FSCS as a central Government body in 2008 but the Treasury is only now implementing the changes as part of the banking reform bill.
The FSCS says its reclassification is under review by the ONS and has not yet been confirmed, but the Government is pressing on with reforms.
The Treasury says the move will not affect the wider financial services industry and it will have no powers to intervene in the FSCS’s day-to-day affairs. The Financial Conduct Authority will remain responsible for setting the FSCS’s rules and annual levy.
The bill states: “These provisions will ensure the Treasury has access to the information necessary for its Principal Accounting Officer to be assured of high standards of regularity and propriety at FSCS; they will also clarify responsibilities and ensure value for money for the taxpayer.”
The bill will also impose new statutory duties on the FSCS such as a requirement to operate swiftly and efficiently for the benefit of claimants, to mitigate taxpayer costs and provide the Treasury with accounting and management information.
Clayden Associates director Dan Clayden says: “It is never a bad thing to have more scrutiny of financial resources to ensure money is used well.”
In March, the FSA published a consultation proposing quicker and more efficient claims handling, which it admitted will lead to higher industry levies.