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House of Lords slams “unfair” FSCS levies

The House of Lords economic affairs committee has branded Financial Services Compensation Scheme levies “unfair” and called for calculations to be based on firms’ levels of risk.

In its Banking Supervision and Regulation report, published today, the committee says while it is impossible to accurately measure the riskiness of bank portfolios, levies should not be calculated purely on the size of institutions.

The report states: “Some inequity in the levies charged by the Financial Services Compensation Scheme is inevitable. The current scheme is nevertheless clearly unfair to institutions which, like the building societies, are constrained from the riskiest business. It is also a potential source of destabilising moral hazard.

“The Government should promote changes to ensure that contributions to the FSCS should be at least broadly related to the riskiness of the business in which regulated firms engage.”

Investment advisers have been hit by a huge increase in FSCS levies which rose to £44m this year, up from just £9m last year.

Investment advisers also had to pay an additional interim levy of £40m because of the default of the stockbroker Pacific Continental Securities.

The committee is calling for the Government to move towards pre-funding of the FSCS “as soon as practicable”.

The report says: “A pre-funded deposit insurance scheme would have a counter-cyclical effect: money levied in boom times would be returned to the banking sector during times of financial fragility. It would also increase depositor confidence.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. House of Lords & FSCS levies
    At last somebody outside the intermediary community (and Building Societies) are talking sense!

    House of Lords do talk a lot of sense in many instances and they are not afraid to speak out against the govenment & quangoes, and the main political parties.
    I am very concerned about that if we get rid of the second house or make it an elected house, they are going to be linked up with the government & the main parties more than they are now, and therefore be prohibited from making a stand and speak ‘away’ from ‘party line’.

  2. Ken Bannister (Active Weallth Ltd) 2nd June 2009 at 10:27 am

    FSA Bonuses
    I find it offensive that our small iFA buisness has to pay additional levies for a business that failed which has absolutley no relationship to us at all. It a like an electrican failing in Northumberland but a plumber in Corwall has tp pay for his faults. Absolute madness. Furthermore the FSA has recently paid £20m in bonues to their staff. How can this be when it is failing so dismally? The governemnt need to get a grip of their departments. The FSA is just another massive department swallowing money with no clear results.

  3. House of Lords slams unfair FSCS levies
    I am delighted to see the House of Lords standing up for us, but will they be able to do anything about it? I think it is preposterous that small IFA firms that do not get involved in contentious business still have to pay large levies to the FSCS to pay the the misdemeanours of others. For example, we never sold any precipice bonds because I checked them out and found that they were not suitable for cautious clients. However, other firms sold bucket loads of them and made fortunes in commission. Then when it went wrong, they simply closed down and left us to subsidise them. It is completely wrong.
    Secondly, how can the FSA justify increasing our fees, just so they can pay £10 million worth of bonuses to their staff.

  4. FSCS Levies
    Under the current system, if every other firm of IFA’s in the country went bust and my firm was the only one remaining, we would fund the whole of the FSCS levy. This is ridiculous. We also have avoided precipice bonds and the like and yet will be forced to pay for the greed of others. Why can there not be a levy on every policy/contract/investment sold or bought. It is grossly unfair that well run compliant firms should pay for the sins of other greedy firms. It is also scandalous that the FSA should be using our money to pay staff bonuses. Yet another group with their snouts in the trough!!!!

  5. fees & bonuses
    I cannot believe that I am yet AGAIN forced to pay for other peoples mistakes FSCS, and in a time where the country is bearly staying afloat the FSA manages to find £20ml to squander on as far as I can see, unjustified bonunses for staff that do not appear to have made any real contribution other than to cause confusion to both IFA,s and the poor old public, who they beleive they are acting for. SOME ONE TELL MY WHY THEY HAVE BEEN PAID THESE BONUSES.

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