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FSCS compensation payments skyrocket

The Financial Services Compensation Scheme paid out £20.9bn in compensation payments in 2008/09, up from £82.93m in 2007/08, mainly attributed to the failure of five banks.

According to the FSCS annual report, levies raised from firms reached £170.6m in the last financial year, up from £93.07m in 2007/08.

FSCS chief executive Loretta Minghella has reiterated that levies for the failure of Bradford & Bingley, Landsbanki, Heritable, Kaupthing Singer & Friedlander and London Scottish may fall on advisers after 2012.

In October last year, Money Marketing reported that only deposit taking firms would be required to pay levies for the defaults for the next three years, but that the FSCS was unsure what would happen after that date.

The FSCS agreed loan facilities with HM Treasury that are interest only for the first three years and in 2012 the FSCS will agree a timescale with HM Treasury for repayment of the principle amount.

Minghella says: “Until the repayment timetable is agreed in 2012 it is not possible to say what levy class or classes will be levied for any outstanding principle.

“We recognise the challenges for levy payers in dealing with this uncertainty and plan to work closely with HM Treasury with a view to giving levy payers as much notice as possible about the likely impact on future levies.”

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