Published on 29 March 2018
Financial Services Compensation Scheme - Management Expenses Levy Limit 2018/19 - PS5/18
Overview
This Prudential Regulation Authority (PRA) Policy Statement (PS) follows Consultation Paper (CP) 3/18 ‘Financial Services Compensation Scheme – Management Expenses Levy Limit 2018/19’ and sets out the final rules for the Financial Services Compensation Scheme (FSCS) Management Expenses Levy Limit (MELL) for 2018/19. The PRA received no responses to the CP.
This PS is relevant to all PRA-authorised firms, but contains no material of direct relevance to retail financial services consumers or consumer groups upon which they might need to act.
The Financial Conduct Authority (FCA) Board has also made its respective rule for the 2018/19 MELL.
The FSCS is the compensation fund of last resort for customers of failed authorised financial services firms across the PRA’s and the FCA’s regulatory remit. The MELL is the maximum amount which the FSCS may levy in a year without further consultation. It provides the FSCS with adequate resources to process compensation claims resulting from the failure of financial services firms. These functions are conferred on the FSCS by Part XV of the Financial Services and Markets Act 2000 (FSMA).
Background
In CP3/18, the PRA and FCA consulted on a proposed MELL of £77.7 million for 2018/19. This included:
- FSCS management expenses of £72.7 million to cover the FSCS’ ongoing operating costs including staff, facilities, claims handling, and legal and other professional services; and
- an unlevied contingency reserve of £5 million which allows the FSCS to levy additional funds at short notice in the event of a significant unexpected event, without the need for further consultation by the PRA and FCA.
The final rules (see Appendix) will apply for the financial year ending 31 March 2019.
Policy Statement 5/18Appendix
Published on 18 January 2018
Financial Services Compensation Scheme – Management Expenses Levy Limit 2018/19 - CP3/18
Background
This Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) consultation paper (CP) sets out proposals for the management expenses levy limit (MELL) for the Financial Services Compensation Scheme (FSCS).
This consultation is relevant to all PRA and FCA authorised firms, but contains no material of direct relevance to retail financial services consumers or consumer groups upon which they might need to act. As costs may be passed on to consumers in the form of higher prices, consumers may indirectly meet a part of the FSCS levies. However, an efficient and adequately funded compensation scheme is beneficial to all consumers.
Summary of proposals
The MELL is the maximum amount which the FSCS may levy in a year without further consultation, and is proposed to be £77.7 million for 2018/19. This includes a management expenses budget of £72.7 million and an unlevied contingency reserve of £5 million. The proposed MELL limit of £77.7 million would apply from 1 April 2018, the start of the FSCS’ financial year, to 31 March 2019.
Responses and next steps
This consultation closed on Friday 16 February 2018. The PRA and the FCA invite feedback on the proposed MELL set out in this consultation. Please address any comments or enquiries to CP3_18@bankofengland.co.uk.The PRA is accepting responses on behalf of both the PRA and the FCA, and responses will be considered by both authorities.
Following this consultation, the PRA and the FCA will issue respective policy statements or equivalent Handbook notices (as appropriate) so that the final rules can be in place for the start of the FSCS’ financial year on 1 April 2018.