Financial Services Compensation Scheme (FSCS)
Funding Tariff Changes
The Panel continues to be concerned about the overall cost of regulation for smaller firms.
In particular, we are concerned about how best to manage the potential and significant FSCS liabilities falling upon smaller businesses as a result of the decision to cross-subsidise the losses incurred particularly by large businesses within other sectors of the financial community.
We welcomed the FSA’s commitment to a review of the FSCS funding during 2010 and we are feeding in views from the smaller business community to that review process.
Previously, the Panel has strongly opposed the cross-subsidy that was introduced between sectors and, in particular, expressed strong reservations about the inappropriateness of smaller firms being expected to cross-subsidise the liabilities of larger businesses. The SBPP is lobbying hard for the exemption of smaller regulated businesses from having to cross-subsidise FSCS liabilities arising from the future failure of institutions in other sectors. The Panel continues to work with the FSA to try to reduce the potentially huge FSCS liabilities falling upon smaller businesses in two/three years’ time.
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What the SBPP has said previously on this topic:
2007/8 saw the culmination of the discussion process into the operation and funding of the FSCS. The Panel expressed reservations about the appropriateness of smaller firms being expected to cross-subsidise the liabilities of larger businesses. In addition, further research into the underlying reasons for firm insolvencies, and measures that could be taken to ameliorate these, was recommended.