The Investment Management Association (IMA) has called on the Financial Services Authority (FSA) to increase the amount insurers and banks contribute to the Financial Services Compensation Scheme (FSCS) after warning fund managers faced cross-subsidies which were three times higher than the other institutions.
In a letter to the FSA, the IMA proposed banks, as well as life and general insurers, should see the amount they contribute to any cross-subsidy raised substantially.
Under the current proposals, organisations regulated by the soon-to-be-created Prudential Regulation Authority - covering firms such as banks and insurers - will contribute to the FSCS on a fee basis.
However, firms falling under the scope of the Financial Conduct Authority alone - which includes asset managers - will have to pay an amount dictated by an affordability calculation.
The IMA said such a set-up could see its members pay substantially more in cross-subsidy amounts.
"Basing other providers' contributions on the basis of fees but the fund managers on affordability leaves fund managers liable to contribute to a cross-subsidy almost three times the levels applied to life insurance companies for mis-selling of life insurance products," it said.
To rectify the situation, the IMA said caps on payments by banks and insurers should be raised.
"The IMA suggests this should be reviewed and that the cap for general insurance firms cross subsidy into the FCA pool be raised to £52m, for life insurance to £105m, and for banks it should be raised to £165m."
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