The Financial Services Compensation Scheme is “very conscious” of the need to demonstrate its value for money to the industry, says chief executive Mark Neale.
In his latest blog, published today, Neale says the FSCS’s indicative levy of £313m for 2014/15 is “by any standard a large number”.
The FSCS announced its levies for the next financial year last week, which included a levy of £105m for investment intermediaries.
Neale says: “We are very conscious these are costs which fall on the industry, including on many small firms.
“So what is the industry getting in return? The fairly obvious answer is a compensation service: FSCS protects consumers who lose money when financial services businesses fail.
“But paying compensation is, in reality, a very important means to a couple of even more important ends. Those ends are confidence in financial products and, particularly at times of stress, financial stability.”
Neale says achieving value for money is one of the FSCS’s key strategic aims set out in its “vision” for the next five years.
He says the FSCS is achieving this by outsourcing the majority of claims it receives, investing in online claims handling processes, and maximising recoveries from the estates of failed businesses.
Neale adds: “We bring to bear both legal and financial expertise on this task. We will only pursue recoveries where we have a reasonable prospect of success and where the recoveries we can achieve exceed the costs of pursuing them.
“Since 2008 FSCS has recovered over £3.5bn. We either return this money to the relevant industry sector or use it to reduce our liabilities.
“So FSCS is performing an important service for consumers on behalf of the industry. But we are very conscious that we acting on the industry’s behalf and need to demonstrate our value for money.”
Last week Money Marketing reported the FSCS is facing total legal costs of £30m in its attempt to recover compensation from advisers who recommended clients invest in Keydata. This is close to half the £75m the FSCS said last year it expected to recover in Keydata compensation.
The FSCS is also seeking new lead case defendants in the legal challenge after settling with a number of the six lead defendants selected last year, Money Marketing understands.