The FSA has explained the methodology behind its proposed new threshold system ensuring there are limits to the contributions made by firms to the Financial Services Compensation Scheme.
The regulator says the new method will provide a ‘pool’ of £4.4bn of retail funding in any financial year, which would be available to compensate eligible claimants in the event of a significant default. Currently, in the case of default, the FSCS is only able to levy up to a designated pre-determined amount but is then forced to increase the amount each year if needed, to cover the cost of compensation paid. Under the new proposals - set out in CP07/05: FSCS Funding Review - each new sub-class has been given a threshold. For example, the sub-class of life and pension providers has a thre...
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