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FSCS says no bill for IFAs at least till 2011 as levy for banks jumps to £450m from £5m

Deposit-taking firms will need to stump up more than £450m in Financial Services Compensation Scheme levies next year following Bradford & Bingley’s collapse, compared to the £5m they contributed this year.

The FSCS borrowed £14bn from the Bank of England to pay for retail deposits to be transferred from B&B to Abbey. Interest-only repayments are required for the first three years, with the first payment estimated at £450m due in September 2009.

A spokeswoman says: “Next year in excess of £450m will need to be raised from deposit-taking firms to cover the cost of the interest repayment.”

The FSCS says it is unlikely that any other firms, including IFAs, will be affected until 2011. At that point a payment schedule will be implemented to repay the principal loan amount, but the FSCS is unsure who will be required to make payments.

A spokeswoman says the schedule may run over several years so it is “highly unlikely” that the payments required will exceed the maximum amount the FSCS can levy deposit-holding firms, which is currently £1.84bn. But she says if more money is needed after three years it may “dip into” the general retail pool.

She adds: “It’s too early to say at this time whether levies will increase for IFAs to pay for this loan after the initial three years. But we will also be making recoveries from B&B so all the money received will be used to reduce the loan.”

IFA Defence Union founder and chairman Evan Owen says IFAs are unable to plan ahead for levy increases if they are not given any prior notice.

He says: “If this is long-term and the demand is unknown, how can we plan ahead? Why should IFAs have to pay the price of the regulator declaring B&B in default anyway? B&B had assets that were sold to Santander.”

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