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IFAs facing levy rise over B&B

The FSCS says it is unable to predict if the Bradford & Bingley nationalisation will trigger increased levies on IFAs and the rest of the financial services industry.

This week, the Government and the FSCS took on a £14bn loan from the Bank of England to cover the B&B intervention. The authorities hope the sale of B&B assets, namely its mortgage books, can cover the loan but admitted any remaining shortfall will fall on to the financial sector.

Aifa director general Chris Cummings says: “This is moving the FSCS into new territory. The enormity of the loan raises some serious questions for the industry and has potential ramifications for the wider financial services sector, not just banks.”

If the sale of the B&B assets does not meet the debt, the next £1.84bn will fall to the banking sector. After that, a further £2.2bn will fall to the general retail pool, which will include IFAs and mortgage brokers. If this is still inadequate, the FSCS will increase levies on the financial industry to meet repayments.

An FSCS spokesman says it understands why IFAs might be alarmed but it was not certain that an extra bill would ever land on their doorstep. He says: “If the recovery of B&B assets is high, then future levies will be low, so it might not even affect IFAs. This is a complicated issue. Future levies are not known yet. We have to let the process play out.”

But CMS Cameron McKenna partner Paul Edmondson says that IFAs will be hit with a lot more than £2bn as a result of a shortfall in assets. He says: “Repayment of the loan will exceed by a large margin the levy which FSCS can impose on the industry. This would need to increase by approximately 350 per cent to cover the full £14bn loan.”

CBK Colchester principal Peter Chadborn says: “IFAs are annoyed and worried. We pay for more than our fair share for things like this. I just hope if levies do go up, they are proportionate to risk and to who is to blame for all of this.”


Policy decision

If I was one of the 140,000 employees of HBOS and Lloyds TSB, I would go and buy whatever forms of income and payment protection insurance those banks offer as soon as possible.


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