Published on 29 March 2019
PS10/19 Financial Services Compensation Scheme – Management Expenses Levy Limit 2019/20
Please note: Due to the short nature of Policy Statement (PS) 10/19, we have presented the text on this webpage, without a separate document. You can use the ‘Convert this page to PDF’ button below to create a copy.
Overview
This Prudential Regulation Authority (PRA) Policy Statement (PS) follows Consultation Paper (CP) 2/19 ‘Financial Services Compensation Scheme – Management Expenses Levy Limit 2019/20’ and sets out the final rules for the Financial Services Compensation Scheme (FSCS) Management Expenses Levy Limit (MELL) for 2019/2020. The PRA received no responses to the CP that were relevant to the proposals consulted upon and is implementing them as consulted.
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 2019/20 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 for management expenses in a year without further consultation. It provides the FSCS with the resource 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).
In CP2/19, the PRA and FCA consulted on a proposed MELL of £79.6 million for 2019/20. This included:
- FSCS management expenses of £74.6 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 £5.0 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 will apply for the financial year ending 31 March 2020.
Appendix
Published on 31 January 2019
Financial Services Compensation Scheme – Management Expenses Levy Limit 2019/20 - CP2/19
Background
This Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) Consultation Paper (CP) sets out proposals for the management expenses levy limit (MELL) for the Financial Services Compensation Scheme for 2019/20.
This document is relevant to all FCA and PRA authorised firms. It is not directly relevant to retail financial services consumers or consumer groups and they do not need to act upon it.
Summary of proposals
The proposed MELL for 2019/20 is £79.6 million and consists of:
- FSCS management expenses of £74.6 million
- an unlevied contingency reserve of £5.0 million
The MELL for 2019/20 is an increase of 2.4% from the 2018/19 MELL of £77.7 million, which is roughly in line with inflation. The rise in budget reflects a projected increase in volumes across pension/self-invested personal pension (SIPP) claims, forecast to cost £3.9 million. The increase is expected to be offset by FSCS cost efficiencies. £53.1 million, or 71% of the total budget, covers claims handling which is the FSCS’ core function. More details on the MELL and how it is calculated can be found in Chapter 2 of the CP.
Response and next steps
Please send any comments on the proposed MELL by 28 February 2019. Please use the online response form on the FCA’s website or write to the FCA at the address on page 2. The FCA is accepting responses on behalf of both the FCA and the PRA, and responses will be considered by both authorities.
Following consideration of responses, the FCA will issue a Handbook notice and the PRA a policy statement so that the final rules can be in place for the start of the FSCS’ financial year on 1 April 2019.
Consultation Paper 2/19