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FSCS says interim levies may rise further

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  • 07/08/2015
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FSCS says interim levies may rise further
Levy payers to the Financial Services Compensation Scheme (FSCS) could face higher interim fees should the volume of claims increase, the independent body says.

In its 2014/15 Annual Reports and Accounts, the FSCS said the levies it received by financial services firms in the financial year totalled £1.076bn, compared with £1.11bn in 2013/14, which included the interest cost and capital repayment levy for the 2008/09 banking crisis.

In 2013, the FSCS introduced a 36-month funding model to reduce the volatility of annual levies and the likelihood of interim levies and to give greater certainty to levy payers.

However, the compensation scheme pointed that out as the financial services industry continued to face a high degree of uncertainty about the likelihood and timing of possible failures and the volume of claims, there could continue to be occasions when it would need to raise an interim levy.

According to the report, excluding major banking failures and costs associated with PPI firm Welcome Financial Services, the FSCS’s management expenses increased to £71.5m in 2014/15, compared with £57.6m in 2013/14.

Chief executive Mark Neale said: “This increase reflected the costs of our change programme which have now passed their peak and the costs of pursuing recoveries. FSCS’s management expenses budget falls to just over £69m in 2015/16 as the cost of the change programme scales down.”

The body said any money not spent in the 2014/15 financial year would be accounted for to levy payers in the relevant sector through a reduced levy for the following financial year.

The FSCS board has approved a management expenses budget for 2015/16 of £69.1m, £5.7m lower than the 2014/15 budget.

Home finance intermediation, which includes mortgages, paid out £1.7m in compensation in 2014/15, compared with £1.2m in the previous year.

Neale said the FSCS would look to reassess its ‘core values’ over the next few months.

“In the coming months we shall also re-examine FSCS’s core values and aims. Now five-years-old, we want to see if our values have shifted to reflect a different world from 2010; or whether they simply need to be re-endorsed with a clearer understanding of why we believe they crystallise who we are and the service we provide,” he said.

 

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