Published on 27 March 2020
Financial Service Compensation Scheme – Management Expense Levy Limit 2020/21 - PS8/20
Overview
This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 1/20 ‘Financial Services Compensation Scheme – Management Expenses Levy Limit 2020/21’ (see page 2 of 2). It also contains the final rules for the Financial Services Compensation Scheme (FSCS) Management Expenses Levy Limit (MELL) for 2020/21 (Appendix).
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 FSCS is the compensation fund of last resort for customers of failed authorised financial services firms across the PRA’s and the Financial Conduct Authority’s (FCA) regulatory remit. The MELL is the maximum amount that the FSCS may levy for management expenses in a year without further consultation.
Summary of responses
The PRA received two responses to the CP that were relevant to the proposal consulted upon. The PRA’s feedback to these responses is set out in Chapter 2. The PRA does not consider that the responses to the CP raised issues which would lead to any alteration to the proposal and as such has made no changes to the proposal consulted on.
Implementation
The FSCS MELL will apply for the financial year ending Wednesday 31 March 2021.
The FCA Board has also made its respective rule for the 2020/21 MELL.
The policy set out in this PS has been designed in the context of the UK’s withdrawal from the European Union and entry into the transition period, during which time the UK remains subject to European law. The PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework at the end of the transition period, including those arising once any new arrangements with the European Union take effect.
The PRA has assessed that the policy would not need to be amended under the EU (Withdrawal) Act 2018 (EUWA). Please see PS5/19 ‘The Bank of England’s amendments to financial services legislation under the European Union (Withdrawal) Act 2018’ for further details.
Policy Statement 8/20Appendix
Published on 15 January 2020
Financial Service Compensation Scheme – Management Expense Levy Limit 2020/21 - CP1/20
Overview
In this Consultation Paper (CP), the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) set out proposals for the Management Expenses Levy Limit (MELL) for the Financial Services Compensation Scheme (FSCS) for 2020/21. This CP is supported by the publication of the FSCS’s Plan and Budget for 2020/21.
This CP 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 contribute to part of the FSCS levies. However, an efficient and adequately funded compensation scheme is beneficial to all consumers.
Summary of the proposal
The proposed MELL is £83.2 million for 2020/21, consisting of a management expenses budget of £78.2 million and an unlevied contingency reserve of £5 million. The proposed MELL would apply from Wednesday 1 April 2020, the start of the FSCS’s financial year, to Wednesday 31 March 2021.
Responses and next steps
This consultation closes on Monday 17 February 2020. The PRA and the FCA invite feedback on the proposed MELL set out in this consultation. Please address any comments or enquiries to CP1_20@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 consideration of responses, the PRA will issue a Policy Statement and the FCA will issue a Handbook Notice so that the final rules can be in place for the start of the FSCS’s financial year on Wednesday 1 April 2020.
The proposals set out in this CP have been designed in the context of the current UK and EU regulatory framework. The PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework, including those arising once any new arrangements with the European Union take effect.
In the event that the UK leaves the EU with no implementation period in place, the PRA has assessed that the proposals would not need to be amended under the EU (Withdrawal) Act 2018 (EUWA). Please see PS5/19 ‘The Bank of England’s amendments to financial services legislation under the European Union (Withdrawal) Act 2018’ for further details.