As a result, the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have proposed a notable increase to the FSCS’s management expenses budget.
The regulatory bodies have called for a 4.8 per cent increase in the body’s budget to £78.2m for the 2020/21 financial year, with three quarters of this down to an expectation of a larger and more complicated workload.
The consultation paper also notes that the FSCS has cautioned it may need to use £2.6m of its “contingency reserve” for 2019/20 due to an unexpected increase in the number of claims it has received.
It states that if such a budget was not established then “the FSCS would not be able to operate and provide direct benefits to consumers through the payment of compensation to eligible claimants in the event of firm failure”.
The management levy is separate from the compensation costs levy, paid for by financial firms, which funds the compensation payments made to wronged consumers.
A campaign from broker bodies last year ensured that the contribution paid by mortgage brokers dropped from £22m in 2018/19 to just £4m in 2019/20.